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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.

Hora Tevfik v HMRC

Another recent case law on Capital Allowances highlighted HMRC’s position on two main points.

1. HMOs (Houses of Multiple Occupation) do not qualify for Capital Allowances
2. Insufficient supporting information for a claim can enable HMRC to raise an enquiry beyond the normal time limits.

1. HMOs do not qualify for Capital Allowances.

HMOs do not qualify, a long held view of ours since we were involved in the original HMRC briefing 66/01 and 45/10; it didn’t though stop a number of advisors pursuing claims on HMOs and which effectively gave rise to this latest ruling.

To clarify the position, a house which has been converted to bedsits, but has a ‘communal’ area of a kitchen, living room etc. such as an HMO, is still part of a dwelling house and therefore does not attract capital allowances. Blocks of flats however, with common areas such as basements, stairs and lifts do attract Capital Allowances, excepting the new Structural and Buildings allowances; yet another complication for taxpayers!

2. Insufficient Information to support a claim can enable HMRC to raise an enquiry

HMRC’s normal time limit for making an enquiry into a tax return that has been filed on time is one year from the filing deadline.

However, where there is insufficient information to determine the validity of a Capital Allowances claim, as there was in this case, HMRC has the power to make ‘discovery assessments’ to prevent loss of tax; this can be 4 years after the end of the relevant tax year, or where someone has deliberately not provided information, up to 20 years after the end of the relevant tax year.

Consequently, HMRC were able to raise an enquiry into the HMO claim made by Hora Tevfik even though the normal time limits had expired.

A common question we are asked by our clients is should we include your capital allowances claim report within the tax return? Our view has been yes, on this very basis that it is a valuation of tax allowances and that providing the report discloses sufficient detailed information to allow HMRC to make a reasonable judgement as to whether or not they make further investigations.

The case brought up several other interesting points, known already, but which are nevertheless useful to remember when preparing a claim:

1) that the burden of proof is on the taxpayer to establish the expenditure is qualifying
2) evidence of a property survey and specific identification of a plant and machinery can be used to substantiate any claim
3) using a professional advisor who provides a detailed report can provide added certainty to clients beyond the normal time limits for making an enquiry

Veritas Advisory Directors are recognised by HMRC and experienced across all property sectors including thousands of student accommodation and residential blocks with non-dwelling elements, using successful techniques that maximise the claims in accordance with the Capital Allowances legislation.