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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.

From April 2020 non-resident landlords are to be brought under the UK corporation tax regime.  This brings with it a significant shift in the way non-resident landlords will be required to conduct their tax affairs.  One consequence is that the new interest expense restrictions will apply.  Here we explore who is likely to be affected and what can be done about it.

The shift from paying income tax at 20% currently to moving across to the corporation tax regime where tax rates are currently at 19% and earmarked to fall further (to 17%) is a positive for non-resident landlords.  It does however, bring with it the requirement to satisfy all the same obligations and restrictions which exist for current UK corporates which includes the recently introduced restriction on the amount of deductible interest-like expenses.

Although the new rules have been effective from April 2017 they only apply to the UK corporation tax regime. In simple terms the new rules disallows interest-like expenses to the value of approximately at least £2 million across a group.

£2 million may on the face of it seem a reasonable threshold but with the amount of debt on property investments it is likely that most non-resident landlords will be caught in this new regime. Therefore, despite the reduced corporation tax rate, they will suffer from increased tax liabilities reducing the net return on their investments.

Non-resident landlords who were previously able to mitigate the tax using the interest debt relief often did not need the tax relief offered by Capital Allowances and therefore it was not a consideration during the transaction process due to the negligible benefit it provided.

However, this is likely to change going forward with Capital Allowances offering the only means to mitigate the increased tax burdens. Coupled with the changes to the Capital Allowances legislation effective from 2014 on property acquisitions (s187a Capital Allowances Act 2001), one can expect an increase in the number Capital Allowances enquiries during the due diligence process on transactions.

It will be essential that investors receive the necessary specialist Capital Allowances advice, even if it is just to ensure that contract wording is drafted in a way to ensure that any ability to claim post completion is not lost due to an unnecessary oversight or omission, commonly due to a mistaken perception that Capital Allowances don’t apply or cannot be claimed by a Purchaser.