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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.

Glais House Care Limited v The Commissioners for Her Majesty’s Revenue & Customs

We were surprised by the content of this case, the relatively low values to take a case to Tribunal, and the error in entitlement, eligibility, apparent valuation methodology plus also the contract of sale which ignored the facts of the values involved. There is no mention of who prepared the claim, only that is was the accountant who instructed counsel for this client.

In summary, this is a case about the valuation of the allowances on the perceived simple acquisition of a care home. In addition to the claimant not recognising legislation restrictions on the value of the claim the vendor had also submitted a claim on items that were ineligible.  The result was a reduction in the claim from £318,792 to £254,602.

This case covers many aspects of the Capital Allowances legislation, but fundamentally is that to make a claim a tax payer must claim in accordance with the legislation.  However, it is complicated, and emphasises the point that specialist advice should be taken to reduce the risk of ending up in a lengthy and costly exercise in court, over what is a relatively small amount of benefit in the resulting decision.

There were errors in the claim preparation by both the vendor and purchaser, as well as in the sale contract.  First, that there was not enough due diligence during the acquisition to establish the vendors position, and that this should have been agreed and a CAA2001 S198 entered into the contract.  It also demonstrates that attaching a figure in a contract for “equipment” does not hold HMRC to agree to that figure, as in this case they did not.

The vendor made a claim for £220,454, including cold water, which they were not entitled to as the legislation specifically excluded this item.  “I would note cold water may have qualified if it was argued as an item of plant for the specific use of the trade”. The purchaser submitted a claim based on their purchase price for £318,792, less the equipment figures, but also included correctly “an overage” claim for cold water and electrics installation, being the first tax payer to incur expenditure after the introduction of integral features in 2008.  The issue is that you are often restricted to a previous claim and this was not considered.

A point was also made that the claim was calculated by valuing the fixtures and applying an index.  It was reported The Valuation Office Agency used a different basis, which we assume to be the recognized formula for an apportionment, and it just so happened to come out to the same figure.  If it had not, there would have been a further issue regarding the valuation.

The parties at the time of the property sale agree to allocate £35,000 to equipment, however, under the capital allowances calculation this figure was £18,458, and the figure overruled by HMRC.  The reason being that the value transferred can only be the maximum amount claimed by the vendor, a figure half the value in the contract.

The case demonstrates that whilst the HMRC had just cause to dispute the figures, and do check capital allowances claims, it is also reported they acted unreasonably during the proceedings, going back on previously agreed values.  This case emphasises the importance to use an experienced Capital Allowances advisor who has dealt with HMRC and the Valuation Office, as well as the Tribunal, to ensure a favourable outcome without incurring avoidable expensive costs.