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Capital Allowances Incentives to Increase?

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

23 Mar 2022

Written by: David Gibson

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

02 Nov 2021

Written by: Nolan Masters

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

18 Oct 2021

Written by: David Gibson

Archive

 

Latest News

Capital Allowances Incentives to Increase?

23 Mar 2022

In a positive move to encourage capital investment Rishi Sunak announced in the 2022 Spring Statement plans to expand the Capital Allowances legislation, subject to a consultation process, to be formally announced in the autumn budget and to take effect from April 2023

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

02 Nov 2021

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

18 Oct 2021

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

Veritas Supporting Charitable Causes

01 Oct 2021

We have chosen to support four charitable causes reflecting activities that are close to us and to people we know and would like to raise awareness of.

Using Artificial Intelligence for Capital Allowances

27 Sep 2021

Can Artificial Intelligence help claim capital allowances? In addition to preparing detailed claim reports for clients, Veritas Advisory, in partnership with Brunel University and Innovate UK, are applying technology to solve some of the issues, the main one being how to use data efficiently and correctly.

New Case Law – Potato Store is Plant

07 Aug 2021

JRO Griffiths Limited v The Commissioners for Her Majesty’s Revenue and Customs [2021] UKFTT 257 (TC) resulted in the taxpayer winning their appeal in whether or not a warehouse used to store potatoes for a crisp manufacturer is plant.  The taxpayer won on 2 counts.

Estates Gazette Article – Capitalise on Allowances

20 Jul 2021

Veritas Advisory Director Nolan Masters, together with Alex Barnes a Partner at BDB Pitmans LLP, have published an article in Estates Gazette on how capital allowances claims can mitigate the increasing cost of tax on property investment.

New Case Law – Satellites

16 Jul 2021

A Capital Allowances case Inmarsat Global Limited and The Commissioners for Her Majesty’s Revenue and Customs UT/2019/0167 V), has been refused by the Upper Tier Tribunal, in relation to the launch of satellites.

Taxation Magazine Article – The New Super Deduction

04 Jul 2021

In the June edition of Taxation Magazine Veritas Advisory Director Nolan Masters set out how the new super deduction and special rate allowances will affect property owners, occupiers and investors. Click here to read the article in full

With the constant fluctuation in fiscal policy on the available tax relief for property expenditure, it can give rise to missed cash savings via Capital Allowance claims.  In this briefing, we provide a reminder for businesses, investors and individuals as to what tax reliefs are available and their benefit.

  1. Plant and Machinery Allowances

Plant and Machinery (P&M) Allowances are the main form of tax relief claimable against certain qualifying fixtures.  There are two forms:

  1. Main Pool – General P&M
  2. Special Rate Pool – Integral Features & Thermal Insulation

General P&M relate to assets which have a faster rate of depreciation, namely IT, furniture items etc. but also apply to building items such as fire alarm and security installations.

Qualifying expenditure is written down at 18% per annum on a reducing balance basis.  For £100,000 of qualifying expenditure, you would claim £18,000 in year 1, with the residual balance of £82,000 carried forward.  18% is then taken in the subsequent period until that fixture is below £1,000 or has been sold or scrapped.

Integral Features are as the name suggests for those fixtures which are more integral to a building and have a longer depreciation life such as heating, main electrics, cold and hot water services. Thermal insulation is expenditure incurred improving the thermal performance of an existing building, such as new glazing or cladding.

Qualifying expenditure is written down at 8% per annum again on a reducing balance basis, although note this is to change to 6% from 1 April 2019 for corporates and 6 April for individuals.

  1. Enhanced Capital Allowances

Enhanced Capital Allowances (ECAs) are for fixtures which qualify either as being energy efficient or water saving technologies.  The Carbon Trust set the criteria for which supplier’s products must satisfy in order for the expenditure to qualify.

The benefit is that the standard rates for P&M Allowances is accelerated to 100%, in the year of expenditure.  The complexity is that the product must either be certified or a listed product on the energy technology list at the point the expenditure is incurred.

In the last budget it was however, announced that this allowance was to be abolished from 1 April 2020 and so for any planned expenditure which has the potential to be claimed for ECAs, the expenditure must be deemed unconditionally incurred before this date, to take the benefit of the 100% tax relief.  After 1 April 2020, the normal rates of Capital Allowances will still apply.

  1. Structures and Buildings Allowances

Structures and Buildings Allowances (SBAs) were announced in the last budget and provide a straight line 2% rate of tax relief over 50 years on any new qualifying expenditure.  The normal P&M allowances will be claimed as before, with the SBA taken on qualifying expenditure not already receiving tax relief.  This will also include some associated professional fees and any demolition costs, but will not include all expenditure, for example planning or general landscaping costs would not qualify.

Therefore, a process of data capture will be required and the need to abstract normal P&M expenditure before capturing the qualifying SBA expenditure.

Unlike for normal P&M allowances, to the extent SBAs are claimed it will reduce the base cost for when the capital gain tax position is calculated on sale.

SBAs automatically pass over to the next owner and so will require a record of when the SBA 50 year life started and the value to be passed across.

  1. Research and Development Allowances

Research and Development Allowances (RDAs) are for expenditure on fixed assets which are to be used wholly or partly in an R&D qualifying activity.  The benefit is that the total building expenditure will qualify for 100% tax relief in the year of expenditure, unlike SBAs which are claimed over a 50 year period.

The key is to firstly identify whether the building is to be put to a qualifying use and this is seen as an activity which is innovative or new to science.

Even where the activity is confined to part of a larger property, the legislation allows a pro rata approach, likewise where a space has mixed users, it is possible to apply a time apportioned approach to claim a portion of the total building cost as qualifying for RDAs.

  1. Land Remediation Relief

Land Remediation Relief (LRR) is not a form of Capital Allowance, but relates to property and land expenditure, providing tax relief to clear any contamination in the land or buildings, such as asbestos, gas, underground oil tanks and Japanese knotweed.

The benefit is that it provides 150% tax relief and is available to both investors and developers, with the latter taking the original cost as a development expense and an additional 50% as qualifying for LRR.

There are several restrictions which have to be checked, for example the claimant cannot be the contaminator or connected to and must be subject to UK corporation tax.  It is worth noting that from April 2020 when non-resident landlords are to be brought fall under the corporate tax regime, they too will then be able to claim LRR, but not for past expenditure incurred under the income tax regime.