If you’re a landlord, you’ll likely be aware of the benefits of a commercial to residential conversion, and may be considering this option for your property. If this is the case, action must be taken in order to avoid missing out on substantial tax relief in the form of Capital Allowances.
These allowances are available to owners of commercial property, which is why a claim must be made before the property becomes residential. In recent years, many landlords are beginning to take advantage of the government’s decision to make permitted development rights for office-to-residential conversions permanent. Whilst landlords are in the process of making this conversion, there is still time to get in touch with Capital Allowance specialists to investigate whether allowances can be claimed within the property whilst it is still classed as commercial.
Capital Allowances are based upon items that are considered part of the property which are eligible for tax relief. These items would include security systems, heating systems, toilet facilities and more. The amount that can be claimed would typically be around 30% of the original purchase price for office buildings. Specialists are required to make a claim because they will already have a qualified team of chartered surveyors and tax advisors, as well as a detailed knowledge of the HMRC guidelines.
Allan Mannion, Business Development Director at Capital Allowance specialists Headley Meredith Associates explains:
“One of the strangest aspects of this subject is that whilst the commercial property a business or individual owns is quite likely to be their highest expense, they are rarely aware of the opportunity for tax relief that comes with it.
In the case of commercial property, you need a specialist team to determine the qualifying items embedded in the property, an understanding of how to use complex HMRC formula and an understanding of the complex tax rules. All of those skills can be applied by a Capital Allowance expert.”
Claims need to be made before or at the point of sale, and before work begins on the property. Once the property becomes residential, all allowances will be lost and there will no longer be a chance to make a claim. The Government have tightened their rules on Capital Allowances, which makes it vital for commercial property owners to employ Capital Allowance specialists to provide all the necessary legal advice and process claims on their behalf. Specialists can survey the property and prepare a report within 5 weeks, which greatly speeds up the rate at which the landlord can receive the allowances.
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Written by Tom Meredith, Managing Director at Headley Meredith Associates.