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New Case Law – Gas Storage

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?

25 Apr 2021

Written by: Clive Curd

Short on Time? Super Deductions in Brief

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

20 Apr 2021

Written by: Nolan Masters

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

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.

20 Apr 2021

Written by: Nolan Masters

Archive

Latest News

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

New 130% Super Deduction Explained

06 Mar 2021

Veritas have been in direct correspondence with HMRC with regards to the new 130% Super Deduction and specifically how it is applied on leased assets. Despite initially appearing as an exclusion on all leased assets, which would encompass most investment properties, there are opportunities to claim the new allowance.

Capital Allowances on Freeports

15 Dec 2020

The Government have issued the responses to the Freeports Consultation, originally published in February 2020, and will offer Enhanced Capital Allowances in Freeport Tax Sites plus a Freeport-specific, Structures and Buildings Allowances.

Society of Trust & Estate Practitioner (STEP) Webinar – Jersey Branch

12 Dec 2020

Veritas Advisory Directors Clive Curd and David Gibson presented on Capital Allowances to the members of STEP Jersey, highlighting the increased importance of Capital Allowances to offshore investors, and how to maximise the potential tax reliefs available including tax planning for future liabilities such as Capital Gains Tax.

£1,000,000 AIA Extended for 12 Months

13 Nov 2020

In a positive move the Government has today announced that the current Annual Investment Allowance (AIA) of £1,000,000, which was due to revert down to £200,000 on 1 January 2021, will be extended for a further year to 1 January 2022.

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.