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New Case Law – Potato Store is Plant

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.

07 Aug 2021

Written by: Clive Curd

Estates Gazette Article – Capitalise on Allowances

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.

20 Jul 2021

Written by: Nolan Masters

New Case Law – Satellites

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.

16 Jul 2021

Written by: Clive Curd

Archive

 

Latest News

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

New Case Law – Gas Storage

25 Apr 2021

A case Cheshire Cavity Storage 1 Limited and (2) EDF Energy (Gas Storage Hole House) Limited v The Commissioners for HM Revenue and Customshas been determined at the Upper Tax Tribunal (UTT).  Does a cavity formed to store gas satisfy the requirements to be allowed as plant?

Short on Time? Super Deductions in Brief

20 Apr 2021

For those short on time, we have provided a bullet point summary of the key points, who can claim and considerations when claiming.

Are Property Investors Invited to the ‘Super-Deduction’ Party?

20 Apr 2021

The fanfare surrounding the announced ‘super-deductions’ was somewhat soured for property investors, in reading of a restriction on ‘leased’ plant and machinery.  Here we set out why for some investors, there is still a way to benefit from these generous temporary tax reliefs.

Claiming Super Deductions – Benefit & Restrictions

20 Apr 2021

In an unexpected offer of generosity, as part of the Chancellor’s spring budget, temporary ‘super’ capital allowances were announced with a view to kick start the post covid recovery.  Here we set out the requirements for making a claim and the benefit on offer.

Veritas in AI Collaboration with Brunel University

30 Mar 2021

Following a recent application through Innovate UK Veritas Advisory, together with Brunel University London, are developing AI-assisted technology to aid SMEs to more efficiently collect and categorise data for tax assessment and tax relief

In an unexpected offer of generosity, as part of the Chancellor’s spring budget, temporary ‘super’ capital allowances were announced with a view to kick start the post covid recovery.  Here we set out the requirements for making a claim and the benefit on offer.

 

What has changed

The introduction of two temporary first year allowances (FYAs) available on new capital expenditure incurred from the 1 April 2021 to 31 March 2023 for contracts entered into after 3 March 2021, namely:

 

Capital Allowances Rate of Relief Examples
Super-deductions (SDs) 130% for main plant and machinery pool expenditure Firefighting systems

Security systems

Data installation

Furniture, fittings & equipment

Welfare facilities

Special Rate (SR) Allowances 50% for special rate expenditure  

Lighting & power

Heating, ventilation & cooling systems

Lifts

Thermal insulation

Water systems

 

Benefit of claiming

In cash terms, claiming the SD provides a 24.7% cash saving, so, for every £100 spent, the net tax cost is £75.30.  If the tax relief is rolled forwards and claimed when the corporation tax rate is increased to 25%, that cost saving increases to 32.5% or a net tax cost of £67.50.

 

Benefit example: Based on year 1 benefit for a company spending £10m on qualifying main plant and machinery assets:

Previous (Before 1 April 2021) With Super-Deduction (After 1 April 2021)
Deducts: Using the Annual Investment Allowance @ £1m Deducts: £10m x super-deduction of 130% = £13m
Deducts: (£10m – £1m = £9m)

18% Writing Down Allowance x £9m = £1.62m

Tax Saving: £2.62m @ CT rate of 19%

Saves £497,800

Tax Saving: £13m @ CT rate of 19%

Saves £2.47m

 

Restrictions & disposals

Applies to corporate tax-payers only, so individuals and partnerships miss out, but can still claim the annual investment allowance of £1m up to the end of 2021.  The qualifying expenditure must be new and not second-hand, so only acquisitions of unused buildings can qualify.

Certain ‘leased’ plant and machinery is also restricted.  In essence, if you lease an asset or lease space in a property, those assets for which the ‘control’ has been passed, will be excluded.  Where the landlord can demonstrate that they have retained control of the qualifying plant and machinery, such as for common areas to a multi let office, where the tenant has only a ‘right’ of access, then a claim can still be made.

There is also the potential for some clawback of the additional 30% tax relief for SDs, if the asset is sold within the period in which the temporary relief ends.

 

Conclusion

The claiming of individual equipment purchases is straight forward enough, albeit there will be an increase in administration to record those claimed assets.  The complexity applies where those potential qualifying assets relate to a wider building project and particularly where the capital project has a mix of landlord and tenant controlled assets.

In this scenario, applying an area calculation method will lead to under claiming and so a detailed valuation exercise will need to be undertaken by a capital allowances specialist, to fully benefit from these generous temporary tax reliefs.