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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.

Corporate tax rates are set to increase by 30% from April 2023, this means property income and capital gains are exposed to higher taxes, therefore tightening investment margins and cashflow.

Below are three simple ways to improve margins and reduce risk:

1. Acquisitions – Capital Allowances typically increase yields by between 0.25% and 1%

  • Capital Allowances are often overlooked in investment appraisals; however, we have advised on some recent transactions where the identification of available capital allowances has assisted in making the deal viable.
  • Don’t accept a Seller’s Capital Allowances position at face value, even where a £2 s198 election is inherited. Opportunities may be available to claim due to timing of expenditure, tenancies, tax positions or specifics of the Capital Allowances legislation that many are unaware of.
  • Always ask for a second opinion on the legal position; there are no costs for our initial legal entitlement checks or advice.

2. Asset Management – Reduce Cost of Energy Efficiency Requirements

  • From April this year commercial buildings must achieve a minimum ‘E’ efficiency standard. From 2028 it is proposed that rating will be ‘B’.
  • Capital Allowances can typically reduce the net cost of capital expenditure by up to 45% for Partnerships and individuals and 25% for companies, 
  • It is not widely understood that using a Capital Allowances specialist can typically identify up to 50% more Capital Allowances than their accountant.

3. Reduce Risk – Capitalised Expenditure v Profit & Loss

  • Many clients write off 100% of their construction expenditure in the P & L and not as capital, this is technically incorrect and increases the chances f an HMRC enquiry.
  • GAAP requirements mean that building projects and associated professional fees must be capitalised where there are any works capital in nature, such as improvements, changes or additions.
  • Only individual works which are a direct repair or replacement qualify as capitalised revenue and can be allocated to the profit and loss; detailed analysis of all building projects will correctly account for the works, maximising savings and reducing risk.

Action Points 

Contact Veritas Advisory for free initial advice on the following:

  • Acquisitions – Estimates of Capital Allowances and advice on legal entitlement to claim.
  • Asset Management – Estimates of Capital Allowances and cash flow forecasts on developments, fit outs and refurbishments