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Capital v Revenue – Understand The Risks v Benefit

As we are fast approaching the self assessment filing deadline for individuals and the amendment window for corporate entities with a year end of March, understanding the importance of what constitutes capital or revenue expenditure, and the risks and benefits associated with it, is extremely important.

24 Jan 2024

Written by:

First Year Allowances for Corporate Members of Partnerships

In a positive move HMRC have updated their capital allowances guidance for partnerships stating that partnerships with underlying corporate partners can claim first year allowances

19 Jan 2024

Written by: Abu Choudhury

Substantial Unclaimed Capital Allowances On Existing Assets

Capital Allowances provide an opportunity to save substantial amounts of money in a lean market yet many property owners and occupiers are already sitting on vast savings without even knowing it.

23 Oct 2023

Written by: David Gibson

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Latest News

Capital v Revenue – Understand The Risks v Benefit

24 Jan 2024

As we are fast approaching the self assessment filing deadline for individuals and the amendment window for corporate entities with a year end of March, understanding the importance of what constitutes capital or revenue expenditure, and the risks and benefits associated with it, is extremely important.

First Year Allowances for Corporate Members of Partnerships

19 Jan 2024

In a positive move HMRC have updated their capital allowances guidance for partnerships stating that partnerships with underlying corporate partners can claim first year allowances

Substantial Unclaimed Capital Allowances On Existing Assets

23 Oct 2023

Capital Allowances provide an opportunity to save substantial amounts of money in a lean market yet many property owners and occupiers are already sitting on vast savings without even knowing it.

The Risk to Lawyers of Not Correctly Addressing Capital Allowances

23 Oct 2023

Solicitors acting for clients on a purchase or disposal of a commercial property must ensure they correctly address capital allowances; failure to do so may give rise to reputational and / or financial risk.

Maximising Capital Allowances and Avoiding Pitfalls Through Timing

23 Oct 2023

The rules surrounding the transition between Super Deduction and Full Expensing can be complex and the importance of fully analysing and understanding any contract for construction or purchase is significant.

Use Capital Allowances to Help Pay for Higher Spec Offices

23 Oct 2023

On a typical £1m CAT B fit out the landlord or occupier, whoever is incurring the expenditure, could recover up to £250k by claiming Capital Allowances.

HMRC Capital Allowances Enquiries Focusing On Certain Sectors

26 Sep 2023

An increasing number of claims being submitted to HMRC are not fully compliant with the legislation, and in some cases are double what they should be, particularly in certain industry sectors.

Unearthing Hidden Treasures – LGT Wealth Article

01 Sep 2023

Veritas Director David Gibson was recently interviewed by Nicholas Duffy of LGT Wealth Management for thoughts on how family offices and property owners can identify Capital Allowances to help leverage other investments. Click here to read in full

Offset ESG Costs With Capital Allowances

09 Aug 2023

The impact of both ESG and MEES on the property sector is resulting in significant capital investments. To incentivise and reduce the net cost of capital investment, tax relief is available by way of capital allowances.

Currently most non-resident landlords are able to sell a UK owned commercial property without being charged on the gain.  From April 2019, legislation comes in which will result in any capital gain arising from an asset sale being taxed but limited to property values being rebased from April 2019.  Here we explore who this measure will affect and how Capital Allowances can offset this increased tax liability.

This rule change will apply to most, however, there will be some exemptions available for those who would not be chargeable to corporation tax if they were a UK resident, which will include some pension funds.  The details are still to be confirmed, but it is likely that some form of election mechanism to provide exemption will be available.  Investors would realise a gain on the sale of their interest in the fund, but if exempt then they too can claim an exemption.

Not all property is transacted as an asset sale and the sale of UK property as part of a company disposal, the gain currently in most cases is not taxed for non-resident investors.  Under the draft legislation, gains arising from the disposal of shares which invest in UK property will also be subject to UK tax from April 2019.

To mitigate this increased tax liability non-exempt non-resident investors could consider tax-exempt vehicles such as a PAIF or a REIT although there is a cost to convert as well as compliance and ongoing reporting requirements.

Alternatively, Capital Allowances can be used to help offset this increased tax liability.

Capital Allowances have not been of great importance to date for many non-residents due to the way they are structured and the fact that many do not become liable for tax for a number of years.  However, this change, and the additional tax burden that it creates, is very likely to alter the perception and need for Capital Allowances relief.

Those investors whose properties have increased in value, typically due to a combination of time, market conditions, active management and physical improvement with refurbishments and extensions will need the Capital Allowances going forward to offset against their future gain.

There is a common misconception that claiming Capital Allowances will affect the capital gains tax position on sale.  Unless the property is sold at a loss one can claim Capital Allowances without affecting the base cost under s41(1) Taxation of Chargeable Gains Act 1992 (TCGA 1992).

It is not mandatory to claim Capital Allowances relief, unless you are a REIT or PAIF, so it could still be argued that if there is no taxable income to offset then why should one consider Capital Allowances now, and not in the future when tax liabilities arise.

The benefit in claiming as early as possible is that Capital Allowances can be disclaimed and rolled forward meaning that when an entity becomes liable to tax in the future it will have a greater pool of allowances to be able to be used immediately, meaning that a greater portion of the tax liability can be reduced, or indeed wiped out.

Failure to prepare for future tax liabilities, or in other words failure to claim now, will essentially mean companies could be worse off.  In all instances though advice should be sought from your accountants or tax adviser as to the potential future tax liabilities and from your specialist Capital Allowances advisor on how to maximise the Capital Allowances relief.