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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

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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.

It was announced in the budget that the Annual Investment Allowance would increase from its current £200,000 level to £1,000,000 from 1st January 2019.  This gives the majority of businesses the ability to receive 100% tax relief in the year of expenditure for all qualifying plant and machinery expenditure over the next two years.  Here we set out the main ways that a business can utilise this valuable tax relief.

All businesses including non-resident landlords can claim the Annual Investment Allowance (AIA), with the exception of mixed partnerships being specifically excluded.  In our experience, this valuable form of tax relief can often be overlooked when completing the relevant tax returns and this can be due to a number of reasons.

Firstly, the expenditure on which the AIA can be claimed on can be unclear, both in terms of the eligibility and also in terms of having sufficient details to determine the qualifying expenditure in order to make a claim.  In terms of what items of expenditure can be claimed upon, it is any expenditure which qualifies for your normal Plant and Machinery Allowances.

For any direct purchases, this can be easier to identify, such as the buying of new IT equipment or trade related machinery.  Where the complexities often arise is in identifying qualifying expenditure which is part of a larger capital project such as a building refurbishment, extension or new build.  In this case the expenditure is often priced by the builder/developer and can often be limited in the level of cost breakdowns.

Even where the costs are not sufficiently broken down, there is still the ability to make a claim for AIA, but will often require employing a Capital Allowances specialist, such as Veritas Advisory who as Chartered Surveyors are able to calculate their own cost breakdown to a level which would stand up to HMRC scrutiny.

The other area of expenditure which can be overlooked is on second hand acquisitions, which is a less obvious form of qualifying expenditure and again will require the services of a specialist to value the qualifying expenditure.  When it comes to second hand acquisitions of property, there is a legal mechanism, applicable in most instances, by which the value of the inherent Capital Allowances is passed across via a s198 election, and which must be in place within 2 years of completion.

Often the question of Capital Allowances is over looked, with the purchaser missing out altogether and so it is critical to ensure that the contractual position is robust, binding the Seller to agree to pass over the unclaimed Capital Allowances.

Finally, the AIA is as the name suggests an annual allowance and so where projects span a number of tax periods, the claiming of the AIA can be overlooked in the earlier periods of expenditure.  Even if the project is uncompleted at the time of the tax return submission, the AIA can still be claimed on qualifying Capital Allowances incurred at that point as part of an interim claim submission.