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Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

02 Nov 2021

Written by: Nolan Masters

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

18 Oct 2021

Written by: David Gibson

Veritas Supporting Charitable Causes

We have chosen to support four charitable causes reflecting activities that are close to us and to people we know and would like to raise awareness of.

01 Oct 2021

Written by: David Gibson

Archive

 

Latest News

Veritas Contribute to UKAA Publication – Improving Returns on Build to Rent

02 Nov 2021

As a member of The UKAA, we were pleased to be invited to contribute to their latest buzz news issue, in which we explain how investors-operators of build to rent can improve investment returns by claiming capital allowances

Veritas Confirmed New Member of UKAA – The Organisation for the UK Build to Rent

18 Oct 2021

Veritas Advisory have now been confirmed as a new member of UKAA, the organisation for the UK Build to Rent sector. 

Veritas Supporting Charitable Causes

01 Oct 2021

We have chosen to support four charitable causes reflecting activities that are close to us and to people we know and would like to raise awareness of.

Using Artificial Intelligence for Capital Allowances

27 Sep 2021

Can Artificial Intelligence help claim capital allowances? In addition to preparing detailed claim reports for clients, Veritas Advisory, in partnership with Brunel University and Innovate UK, are applying technology to solve some of the issues, the main one being how to use data efficiently and correctly.

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?

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.