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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.

The capital allowance legislation was significantly changed in 2014 with the introduction of s187A and B of the Capital Allowances Act (CAA) 2001 to provide a greater emphasis on the buyer to establish their entitlement to claim and if these new requirements are not met, then the capital allowances value is nil.  The consequence of this change has led to the taxpayer forgoing a great amount of tax relief.

With the number of possible scenarios, this article is intended only to highlight some of key considerations and therefore each scenario has to be considered on its own merits with no one size fits all solution.

S187A and B applies where the seller is subject to the UK tax system, irrespective if they actually are in a tax paying position.  This legislation ultimately asks the purchaser to identify any unclaimed capital allowances expenditure and to then agree to the “fixed value” requirement, which is to enter into an election under s198 of CAA 2001 and satisfy the “pooling requirement”, which is simply for the seller to recognise that agreed value in the next tax return.  If either of these requirements are not met, the capital allowances are deemed to be nil.

If you are buying from a non-tax paying entity, so a UK pension, registered charity or government body, then as they are not within the charge to tax, s187A and B does not fully apply. Instead a written statement of no claim is all that is required, which will then give entitlement to claim on the sellers “new” expenditure.  Furthermore, you can look back at past owners’ expenditure to establish whether there are any further claims which have not been made. Without a written statement the purchasers value is nil.

It is therefore vital that as part of the due diligence buying process that a capital allowances specialist be consulted so as to establish what the appropriate contract position should be.  If left unchecked and the contract is either left silent or, worse still, a £2.00 s198 election agreed, then it is likely that a capital allowances benefit will have been lost.  The replies to CPSEs should not be taken at face value, as the seller will often not want to face further scrutiny on the matter and so the onus is on the buyer to have someone to research the claim position and to challenge the initial replies given.

When buying from a seller who could have claimed, then the passing across of any unclaimed allowances is a negotiation point.  Often if a property has undergone a recent refurbishment, then that claim will not have been processed and it is for the buyer to secure those allowances, with the quantification exercise to be undertaken by a capital allowances specialist and paid for by the buyer.

In a market where tax is becoming an ever increasing cost to both businesses and on investment return, clients will and should be paying greater attention to securing the best deal for capital allowances as part of the deal’s due diligence process.  Capital Allowances are a valuable asset and should be part of the transaction negotiation.

Please contact one of the directors at Veritas Advisory to understand more about our capital allowances due diligence process.