Receiving accurate and professional Capital Allowances advice has never been more important.
Not only are Allowances more advantageous than ever before, but HMRC are strategically targeting tax leakage – including through Capital Allowances – with plans to recruit 5,000 additional compliance officers over the next five years.
Capital Allowances rarely stand still. Chancellors can’t seem to resist tinkering, and adjustments to Capital Allowances have been included in every Finance Act since the current legislation was introduced in 2001.
Facing budget cuts stemming from the Global Financial Crisis and struggling to keep tabs on non-compliant claims, restrictions introduced in 2012 and 2014 were designed to make HMRC’s job of policing the legislation easier.
In reality, all the changes accomplished was to create more rules for ill-informed or badly-advised taxpayers to overlook. Consequently, many Capital Allowances claims over the past few years have gone unchallenged by HMRC, despite not being in adherence with the legislation.
HMRC devoted a lot of its staff and resources to monitoring the Coronavirus Job Retention Scheme and other targeted pandemic recovery reliefs and incentives. As that work tails off we can expect to see existing staff – plus a share of the 5,000 new recruits – deployed to other areas. None are more topical or high-profile right now than Capital Allowances.
Already we have seen a notable uptick in enquiries into Super Deduction and Full Expensing claims, after many years of claims being nodded through. This increased activity is very welcome – we’ve long called for a higher level of scrutiny into Capital Allowances claims to weed out some of the unscrupulous advisers operating in the market.
Typical examples of errors (let’s be diplomatic and call them “mistakes”) that we’ve come across include:
- Incorrect (or no) legal basis for claiming on property acquisitions
- Allocating expenditure to the profit and loss account despite being capital in nature
- Claiming Capital Allowances without supporting evidence
- Wrongly claiming Full Expensing or Super Deduction
- Claiming structural works as main pool plant and machinery
- Allocation of expenditure to incorrect pools
- Claiming for assets in non-qualifying areas of mixed-use property
Capital Allowances is a complex and fluid area of tax law. With both the value of tax relief and the likelihood of HMRC enquiry reaching historic highs, investors should seek out specialist guidance from advisors who are professionally qualified. This is the only way to benefit from the full incentive without overstepping the mark.