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Insights
20 Jun 2023

Veritas Open Newcastle Office

As part of our continued expansion plans we have opened an office in Newcastle, headed up by Matt Bell. Matt recently joined Veritas having previously advised on Capital Allowances at KPMG, MHA Tait Walker and George F White.

Matt can be found at The Racquets Court, 3 College St, Newcastle upon Tyne and would be happy to assist you with any Capital Allowances requirements that you may have.

 

 

Insights
14 Jun 2023

HMRC Set To Increase Enquiries Into Capital Allowances Claims

The accelerated 130% super deduction and new 100% full expensing capital allowances are set to drive an increase in HMRC enquiries into Capital Allowances claims, increasing the importance of preparing fully substantiated claims, supported by case law and legislation.

In March this year HMRC started to issue ‘nudge letters’ to companies who have claimed the 130% super deduction and 50% special rate allowance prompting companies to check their basis of claim for these first year allowances with an initial focus on leasing restrictions and companies with an accounting period straddling 1 April 2021.

Nudge Letters – What are they?

It is a cost effective form of communication by HMRC sent to taxpayers who HMRC believe have a tax issue to disclose. HMRC have recently targeted Research and Development Claims which offer significant accelerated tax reliefs, and it is expected there will be a similar push for Capital Allowances claimants who have and will benefit from the new 100% full expensing allowances, in addition to the super deduction claims.

It is also expected that HMRC will open enquiries into those that do not respond or make a full disclosure.

HMRC are requesting companies to provide evidence of the asset purchase contract, when the asset was brought into use, correspondence or the date when the supplier was first approached, delivery dates, copies of invoices etc.

This emphasises the importance of a robust claim report and the need to disclose this within the relevant tax return; a blanket claim approach will not be adequate.

Veritas Advisory recommend using an experienced specialist capital allowances advisor as this avoids any pitfalls in claiming the first year allowances, ensures the tax savings are maximised, and ultimately is able to withstand an HMRC enquiry being raised into your tax return.

Insights
23 Mar 2023

Full Expensing Legislation Published

The Spring Finance Bill 2023 was published on 23 March setting out the legislation of the temporary full expensing capital allowances and 50% integral features.

It has been confirmed that expenditure only has to be incurred between 1 April 23 and 31 March 2026, irrespective of the date of contract for the works. This means that all plant and machinery on new and unused expenditure will benefit from 100% first year tax relief (uncapped) and 50% of the integral features can be relieved in year one with the standard 6% writing down allowance applying in subsequent periods.

For second hand property acquisitions the £1,000,000 annual investment allowance offers 100% first year tax relief.

 

 

 

Insights
15 Mar 2023

Huge Tax Reliefs Introduced In Budget

In the Spring Budget the government announced the largest ever Capital Allowances tax incentives to be introduced for companies investing in their properties and businesses, forecasted to save £8bn a year. The changes are summarised as follows:

Permanent Tax Relief

  • Confirmation of £1million annual investment allowance

From 1 April 2023 to 31 March 2026

  • ‘Plant and Machinery’ on new and unused assets to attract 100% relief
  • ‘Special Rate Pool’ on new and and unused assets to attract 50% first year relief

For 5 Year Period (Dates to be confirmed)

  • Enhanced Capital Allowances in new Investment Zones
  • Enhanced Structures and Buildings Allowances in new Investment Zones

With the corporation tax increasing by 30% it has never been as important to not only maximise the Capital Allowances but to allocate to the higher writing down allowance.

Insights
02 Mar 2023

Brunel University KTP Showcase Event Speaker

Veritas Director Clive Curd presented at the Brunel University Knowledge Transfer Partnership (KTP) showcase event.  The event was welcomed by Prof. Geoff Rodgers, Pro Vice Chancellor, with presenters Mark Lynch, KTP Advisor, and Dr Valentina Stojceska, Reader, Department of Mechanical and Aerospace Engineering.

Clive’s focus was on the experience with a KTP on developing a tax assisted Artificial Intelligence (AI) system to assist SMEs in capturing tax relief, something Veritas have been developing over the past couple of years to innovatively analyse property expenditure for Capital Allowances purposes.

Insights
01 Feb 2023

Accountants – 4 Steps to Maximise Capital Allowances & Reduce Risk

1. Assist Meeting Reporting Deadlines

  • Accountants are seemingly busier than ever and often do not receive notification of building works having been undertaken by clients, or the detail of such works, until just before tax returns are required to be submitted.
  • We can work alongside client’s advisors providing Capital Allowances advice ensuring the client has maximised its full tax savings including the 130% super deduction which ends March 2023; there still remains time to review expenditure incurred over the past two years. 

2. Reduce Risk – Capitalised Expenditure v Profit & Loss

  • Many clients write-off 100% of their construction expenditure to the P&L and not as capital, overstating the revenue position and increasing the chance of an HMRC enquiry.
  • GAAP requirements mean that building projects and associated professional fees must be capitalised where there are any works capital in nature as outlined in the HMRC manual https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim42215
3. Reduce Risk – Typical Errors Giving Rise to HMRC Enquiry
  • Structures & Buildings Allowances (SBAs) – Failure to evidence contract and first use dates of all building contracts and incorrectly claiming SBAs on items normally qualifying as plant and machinery or revenue deductions. he P&L and not as capital, overstating the revenue position and increasing the chance of an HMRC enquiry.
  • Capital Allowances Claims on Property Purchases – Failure to provide full residual land value calculations and instead use of ‘percentage of purchase price’ land values, or omit the HMRC apportionment multiplier completely.

4. Poor Construction Cost Information

  • Lack of detailed cost information to support invoices means accountants are missing capital allowances and allocating as non-qualifying expenditure in the tax computations. A capital allowances advisor with surveying and tax expertise will be able to value and breakdown this expenditure to claim capital allowances in a format acceptable to HMRC.

Action Points

Contact Veritas Advisory for advice on the following:

  • Cash Flow Forecasts, Capital Allowances Estimates & Claim Production
  • Technical Advice & Internal Capital Allowances CPD Sessions (no charge)
Insights
26 Jan 2023

Mission Zero – The Return of Energy Efficient Tax Incentives?

The recently published independent report “Mission Zero” calls for a review of the tax incentives, including capital allowances, before Autumn 2023.  It is wide ranging from incentivising those who innovate, and those businesses who invest in upgrading capital equipment.

The report stated that 53% of businesses plan to claim the super deduction, before the time window ends in March, demonstrating the use of tax incentives.  In the responses to the call for evidence, the report notes extending the first year allowances.

Have we seen this before, with Enhanced Capital Allowances (ECAs), which were abandoned in April 2020?

Capital Allowances experts employed by large companies did claim ECAs, but for SMEs the process was time consuming and complicated.  This is one of the reasons that we at Veritas are developing Artificial Assisted intelligent software, together with the help of government funding, Innovate UK, and Brunel University, to easily capture the right data and assist SMEs and their accountants in taking advantage of the tax incentive.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128689/mission-zero-independent-review.pdf

https://www.brunel.ac.uk/research/Projects/AI-assisted-tax-assessment

Insights
19 Jan 2023

Property Investors – What You Need To Know About 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 
Insights
19 Jan 2023

Agents – What You Need To Know About 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.

Capital Allowances can help aid property agents and their clients as follows:

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 assume clients have capital allowances advisors, especially overseas investors.  

2. Asset Management / Leasing – 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 25% for companies, 

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 
Insights
17 Jan 2023

New Case Law – Urenco Chemplants Ltd v HMRC – What is Plant?

The latest judgement the Court of Appeal in December 2022 on what expenditure is deemed plant has set aside the Upper Tribunal’s decision that the First Tier Tribunal’s (FTT) ruling was incorrect and that the plant was ineligible and did not qualify for capital allowances.  The case was originally heard in 2019.

The taxpayer, Urenco, incurred £1billion of expenditure on a nuclear deconversion facility, their trade providing enriched uranium.  Most of the expenditure was agreed, however, £192million, in the Tails Management Facility (TMF) was disputed.

There have been many tax cases disputing what is plant, a building, structure, for capital allowances.  Recent cases with HMRC have involved a grain silo (May & Amor v RCC) and a potato store (JTO Griffiths Ltd v HMRC) both cases the Taxpayer has been successful.

Several points have come out of this case, did the FTT take a too narrow approach to what is function and premises.  That the “provision of plant and machinery” even though performing as a premise is also a function as plant.  The definition of a building in its common meaning, considering the appearance, does not necessarily mean it is not functioning as plant.

The TMF facility had to meet safety regulations to provide radioactive shielding. One of the comments was that whilst safety was inherent in a building or structure, that the process could still function efficiently, in theory.  However, in practice the walls and roof acted as a shield from a regulatory basis and therefore were in fact a necessity.  Lastly, consideration was given to the original drafting from Schedule AA1 In 1996, which now is CAA s23 list c, items 1-4, where the drafting of the legislation was found to have an error in the Tax Law Rewrite Project.  The key point expenditure “on the provision” of those items, or merely expenditure “on” them, that is not only the expenditure on the asset in question, but associated costs which of items for the item of plant claimed.

With the current super deduction for plant and machinery at 130%, this latest judgment demonstrates the complexities of determining whether an item can qualify for plant.  No doubt, with the extra tax relief available for the last 2 years, HMRC will be looking even more closely at claims submitted.