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24 Jan 2024

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; often we see expenditure incorrectly allocated as revenue deductions.

HMRC enquiries are on the rise across the tax regimes and ensuring accuracy in your return has never been more important and the distinction between Capital and Revenue is not as simple as it may seem and with several large profile cases which have gone through varying stages of legal review focussing around the principles of like for like replacement, modern day equivalents or the concept of entirety.

Where all or large proportions of a capital project have been incorrectly allocated as a revenue deduction, the tax payer themselves could be subject to a fine of up to 100% of the “percentage of tax lost” so for instance on a £1m refurbishment, if this had previously been all classed as revenue expenditure, but actually £500k of this was capital in nature, to an individual the penalty could be upto £225k. The burden of the fine will sit with the tax payer, who have a duty of care to check their returns for inaccuracies.

Expenditure of a capital nature not qualifying for revenue deductions should instead be identified as capital allowances where possible, especially with the generous current 100% full expensing allowances, and prior to that the 130% super deduction, offering considerable tax relief.

We work with a variety of accountants and tax advisors who seek specialist advice in respect of this complex area of tax law. If you require any advice in respect of this matter then please reach out to a member of the Veritas Team who have a strong track record of correctly analysing capital and revenue expenditure on projects, and successfully negotiating these with HMRC where required to do so.

19 Jan 2024

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 such as the 130% super-deduction, 50% special rate pool allowance and 100% full expensing. This applies to both partnerships where you have only corporate partners or mixed partnerships where you have a combination of individual and corporate partners.

One should note the 130% super deduction ended 31 March 2023, therefore the only way for corporate partners can claim this relief will be to amend their tax returns which fall within the relevant period.




23 Oct 2023

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.

There is no time restriction to review historic expenditure for Capital Allowances tax savings, as long as the fixtures are still owned.

Accountants are often relied upon by their property clients to navigate every complex tax regulation, but they cannot be an expert in everything nor have the time and resources to do so, much like how GPs refer patients to specialist consultants for specific treatments.

It is easy to unintentionally overlook specific opportunities to claim capital allowances when acquiring, refurbishing or developing a property. Legislation is not always black and white; even a seemingly simple restaurant fit out or office refurbishment gives rise to opportunities to claim tax savings many would ignore or overlook.

Ensure you receive the correct advice; there are countless reasons why the tax savings have not been realised on historical expenditure yet it is assumed everything must have been claimed.

Speak to one of the Directors to discuss how to unlock the existing tax savings, or if related to current or future projects, how to maximise the accelerated 100% full expensing relief.

23 Oct 2023

The Risk to Lawyers of Not Correctly Addressing Capital Allowances

In most cases, solicitors acting for clients on a purchase or disposal of a commercial property rarely receive information which will satisfy the position of the Capital Allowances. As a consequence, if enquiries are not made in good time pertaining to the amount of Capital Allowances available on a transaction, they can be a sticking point, delay the transaction and potentially lead to lost tax savings.

Capital Allowances are often incorrectly stated as not applicable in the CPSEs, or the default position taken is a £2 s198 election in Sale and Purchase agreements. However, this often does not reflect the actual position nor the most favourable commercial agreement for either the seller or the buyer, with financial implications to either party.

Specialist Capital Allowances advice, ideally at Heads of Terms stage, can help reduce the risk associated with not correctly addressing the Capital Allowances on sale; having the draft contract clause wording reviewed prior to exchange is key in order to protect the allowances for either the seller or the buyer.

On a property purchase of £5m, the total tax deduction could be up to £300k for a corporate entity, or more if an LLP; failure by lawyers to seek the correct advice can expose themselves open to both reputational and financial risk if tax savings are either missed or have to be repaid to HMRC.

For expert Capital Allowances advice on the required due diligence on transactions, please contact one of our team to help.

23 Oct 2023

Maximising Capital Allowances and Avoiding Pitfalls Through Timing

The legislation surrounding reliefs is ever changing, with the introduction of Super Deduction from April 2021, its replacement by Full Expensing in April 2023, and the permanent extension of the Annual Investment Allowance to £1 Million from April 2023 it has never been more important to seek the advice of a specialist Capital Allowances advisor to ensure you are maximising your reliefs. If we also factor in the Integral Features 50% First Year allowance we add to the complexities further.

The rules surrounding the transitions between the two regimes can be complex and the importance of fully analysing and understanding any contract for construction or purchase is significant. With Corporation Tax rates having risen by 32% from 19% to 25% the relief is now more pertinent than ever before.

The entity incurring the expenditure also ascertains the entitlement to claim under many of the newer regimes with more asset rich businesses looking to incorporate to maximise the reliefs going forward.

For expert Capital Allowances advice on how to best maximise your reliefs through timing and optimisation, please contact a member of our team.

23 Oct 2023

Use Capital Allowances to Help Pay for Higher Spec Offices

Post pandemic has seen a flight to higher grade office space by Tenants, both in terms of the amenities on offer and the buildings ‘green’ credentials.  For Landlords wanting to grab a piece of this market, the question often raised to agents is who is going to pay for the fit out.

For smaller office lettings it is often the Landlord who will be asked to procure the fit out works in return for a higher rent over the lease term.  With construction cost inflation, there are added external pressures to account for in making this equation work for both parties.

The good news is that by factoring in the available Capital Allowances, which provides tax relief against certain property expenditure including ‘green’ technology, can significantly reduce the net cost of the fit out.  For example, 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, or almost double that for individuals or partnerships.

Note that the benefit of Capital Allowances can be claimed by both parties and so it is crucial that the agreement is drafted accordingly and so it is advisable to take expert Capital Allowances advice to ensure the best outcome is achieved.

For expert Capital Allowances advice on how to structure lease agreements for fit out works, please contact one of our team to help.

26 Sep 2023

HMRC Capital Allowances Enquiries Focusing On Certain Sectors

HMRC recently made an enquiry into a Capital Allowances claim prepared by Veritas on behalf of an investor who had developed a standard, unremarkable building.

The claim was fully transparent, HMRC viewed all supporting documentation, enquired into the basis of claiming certain items, and then agreed the full value of the claim.

During a meeting with the HMRC Tax Inspector it became apparent that an increasing number of claims being submitted are not fully compliant with the legislation, and in some cases, are double what they should be, particularly in certain industry sectors.

Consequently, HMRC have had internal discussions about focusing reviews into specific Capital Allowances claims to tackle this potential tax leakage. Add in to the mix the recently introduced 100% full expensing allowances and we can expect a substantial increase into the number of HMRC enquiries being raised going forward.

Errors are compounded by poor data, complex rules and lack of knowledge of the detailed legislation; ensure that the advice you receive not only maximises the available tax savings but is also robust enough to withstand HMRC scrutiny.




01 Sep 2023

Unearthing Hidden Treasures – LGT Wealth Article

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. Tax is dry and complicated, but with the right advice it doesn’t always have to be that way. To read the article in full click here
09 Aug 2023

Offset ESG Costs With Capital Allowances

ESG (Environmental, Social, Governance) is a framework to assess a business’ appetite for its green and social responsibility. We have increasingly seen commercial property investors aligning investment decisions with their ESG ambitions.

For property investors this means pursuing buildings which are energy efficient and those that provide spaces with the occupiers’ mental wellbeing in mind.

One of the tools used by Government to advance the environmental aspect of ESG is the introduction of the Minimum Energy Efficiency Standards (MEES). MEES sets the energy efficiency standard of commercial properties with an Energy Performance Certificate (EPC) rating.

This is set to increase from E to B by 2030 as a result property investors are undertaking significant capital investments in either refurbishing existing properties or developing new properties which are compliant.

Capital Allowances Opportunity

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.

Currently you have the Annual Investment Allowance (AIA) of £1m which is available to individuals and corporates to write-off 100% of qualifying capital expenditure in the first year up to a limit of £1m, providing a potential tax saving between £450k (45% personal tax rate) to £250k (25% corporate tax rate) respectively.

For corporates there are further First Year Allowances (FYAs) such as the 100% Full Expensing and 50% Special Rate Pool FYA, both allow for 100% and 50% write-off of qualifying capital expenditure in the first uncapped, respectively. The FYAs are in place until March 2026.

Front End, not Back End, Capital Allowances Considerations

Capital Allowances, despite their enormous potential to reduce the net cost of capital projects, are still rarely considered at the outset of a project, or in value engineering exercises, but rather only on completion when less scope is available to maximise the tax efficiencies. Many companies or individuals incurring the expenditure still do not claim Capital Allowances at all.

Bringing forward consideration of the Capital Allowances, seeking advice from a Capital Allowances specialist, will only help reduce project costs, and in some cases, can make a project viable.



11 Jul 2023

Reduce Costs of Refurbishments By Up to 20%

Whether a tenant or an owner-occupier, significant refurbishment or fit-out expenditure will qualify for Capital Allowances, reducing the net cost of a project by as much as 20% for companies or even more for individuals or partnerships.

What elements of a refurbishment qualify for the tax relief?

Contrary to common perception Capital Allowances isn’t restricted to just mechanical and electrical services; in some instances 100% of a refurbishment or fit out can now qualify for capital allowances, at differing rates.

Current Opportunities

From 1st April 2023, and for the following 3 years at least, 100% full expensing allowances can be claimed on plant and machinery including fixtures within leased buildings. This means that for every £10,000 spent on qualifying assets companies will be able to immediately reduce their tax liability by £2,500. There is no limit to the value of full expensing allowances claimed.

How to maximise the savings

Use a specialist Capital Allowances advisor and submit a fully disclosed and detailed Capital Allowances to HMRC. Not only are HMRC increasing their investigations into the basis of Capital Allowances claims but using a specialist will also help identify those allowances at a higher rate which are not broken down within contractor costs.