fbpx

Author Archives: Allan Mannion

Different types of Capital Allowances

Whilst we always state the importance of commercial property owners making a Capital Allowance claim on their property, owners must be aware of the different types of Capital Allowances in order to make a successful claim.

Writing-down Allowance

Expenditure that exceeds the annual amount claimed for the cost of a capital item may be eligible for a writing-down allowance. This type of allowance can be used if you’ve already claimed Annual Investment Allowance on items worth a total of more than the AIA amount and/or if the item doesn’t qualify for AIA, for example cars or items you owned before you used them in your business. Writing-down allowances are available when you deduct a percentage of the value of an item from your profits each year, and in most cases, the value is what you paid for the item. To claim this type of allowance, group the items you’ve bought into ‘pools’ based on the percentage rate they qualify for. When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return. The amount left in each pool becomes the starting balance for the next accounting period.

AIA Capital Allowance

From April 2008, businesses have been able to claim back a specific amount each year for the purchase of plant and machinery. Each year, claims can be made up to a specified amount, and if possible, you can claim 100% of the cost of plant and machinery if the year that you buy it was a first year allowance. This applies to equipment, machinery and to work vans, but not cars. The maximum amount that can be claimed varies from year to year, but is currently £200,000 from 1 January 2016 for a twelve month period. It is important to note that you can only use your full Annual Investment Allowance in the year that you buy the asset.

Small Pools Allowance

If one of your pools gets down to less than £1,000 (or less before you work out the writing-down allowance) in value after you have used your Annual Investment Allowances for the year, you can claim all of the remaining amount at once as a Small Pools Allowance. You can claim this instead of claiming a writing-down allowance.

First Year Allowance (FYA)

This is fairly similar to the Annual Investment Allowance, as you can claim 100% of the cost of specific assets in the tax year that you buy them. These include:

  • New zero-emission goods vehicles
  • New plant and machinery for use in designated areas within certain enterprise zones
  • Certain new energy-saving and water efficient equipment
  • New cars with carbon dioxide emissions of 75gms per km or less
  • Specific new vehicle gas refuelling equipment

100% first year allowances enable companies to deduct the entire cost of the purchase from the trading profit in the accounting period during which the purchase was made. However, there are restrictions on claiming FYA, since they cannot be claimed where an asset has been received as a gift, and/or an asset has been used privately prior to being used by the business, or where the asset has been used as a sole prop before incorporating and moving into the new business.

Business Premises Renovation Allowance

This type of allowance was introduced to give an incentive to bring unused properties back into use. BPRA gives an initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area. For example, £100,000 spent on refurbishing quality unused premises generates a tax saving of £40,000 in the year of expenditure for a 40% taxpayer. The scheme has been extended to April 2017 and the basic principle is that the property must be within the disadvantaged area, must have been unused for 12 months prior to work starting and must be commercial premises.

Special Rate expenditure

Specific equipment can qualify for this special rate, currently at 8% per year. These types of items would include:

  • Parts of a building considered integral, known as ‘integral features’
  • Items with a long life
  • Thermal insulation of buildings
  • Cars with CO2 emissions of more than 130f/km

For more information on the different types of Capital Allowances and to see what type you can claim on, get in touch with one of our specialists.

Why Veterinary Surgery Owners Can Claim Capital Allowances

Veterinary surgery owners may be interested to know that they have the potential to claim tax refunds on items within their property, also known as Capital Allowances, and are based upon items that are considered part of the commercial building.

These refunds are available to UK tax paying commercial property owners, such as veterinary surgery owners who haven’t made a previous claim on their property. The reason why many owners are unaware of their potential to claim is because they often expect their accountants to have already made a Capital Allowance claim for them, however this is very unlikely due to the specialist nature of the work involved and the requirement for a team of chartered surveyors and chartered tax advisors.

The type of items that could be claimed on within a veterinary surgery would include air conditioning, advanced electrical equipment, toilet facilities and more, all which are essential to the running of the business.

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 single 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 an Embedded Capital Allowance expert.”

The amount of tax refunds available may surprise some, as in most cases, around 25% of the original purchase price of the building would be identified as allowances, which means if a building was bought for £500k there would be around £125k of identified allowances, resulting in a substantial tax refund to the veterinary surgery owner.

ENDS

Word count- 316

What are Embedded Capital Allowances?

It is a little known fact that commercial property owners can claim thousands of pounds in tax relief from their property in the form of Embedded Capital Allowances. Embedded items are inherent in the property, and much to some people’s surprise, range from air conditioning and security systems to kitchen and toilet fittings, which means there can be a lot of tax relief on a great deal of items.

David Martin, owner of Arctic Spas, explains his surprise in finding that he could claim:

“I couldn’t believe that my accountant didn’t do this, and when I found out, I was able to claim back a substantial amount of tax benefits. It turned out that all I needed was a specialist team to identify certain embedded items.”

It is estimated that nearly 80% of these allowances are yet to be claimed, which means there are many commercial property owners unnecessarily missing out on substantial tax refunds due to the complexity of the subject. Claiming these allowances is supported by HMRC who recently said:

“You can claim Capital Allowances on items that you keep to use in your business- these are known as ‘plant and machinery’. In most cases, you can deduct the full cost of these items from your profits before tax.”

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 single 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.”

The amount that can be claimed would surprise some, for example, the typical claim would be around 25% of the original purchase value of the property, which represents £125k of allowances in a £500k property.

ENDS

Word count- 350

 

Cash Refunds for Showroom Owner

We recently completed a claim for a client who owned a showroom/warehouse. This client wasn’t really expecting to find many allowances on their property, but decided to give it a go anyway. Since our initial consultations are free and we don’t charge anything unless allowances are identified, this client had nothing to lose by ‘giving this a go’.

To the surprise of the property owner, we were able to identify allowances on items such as air conditioning, heating systems, lighting systems, door closers, cold water systems and more. These items were holding a wealth of tax relief.

Once we had surveyed the property, we knew this was a worthwhile task for the client, and they soon realised the importance of claiming these allowances, since were able to identify £127,770 of allowances on their property worth £470,050, resulting in a cash refund of £23,500 direct to the property owner!

This case shows the importance of arranging a meeting with us, no matter whether you think a claim might be small or even non-existent, it still has the potential to be a very worthwhile task, with no risk to the property owner. We only charge a fee once we identify allowances, so investigating a potential claim will cost the client nothing, and will confirm what they are entitled to.

The tax refunds provide a wealth of benefits, because as well as the cash itself, the value of the property could increase as a result of making a claim, which adds future benefits on top of the present benefits to making a claim. If you own this type of property, then why not get in touch with a member of our team to see if you could benefit from our specialist capital allowance services? You have nothing to lose!

Why Veterinary Surgery Owners Should Claim Allowances

Embedded Capital Allowances can be claimed by various UK commercial property owners, and veterinary surgery owners are no exception. It may come as a surprise to some that vets could claim a great deal of tax refunds on their property simply due to the size of the property and the items inherent within the building.

The particular items that would qualify for a claim within a surgery are essential items without which the adequate treatment of animals would not be able to take place. Therefore, it is important for vets to claim the tax refunds they deserve on these important items, and further realise that these allowances are a right, not a privilege. The kind of items that would qualify may surprise some, and would include plumbing, electrical equipment, air conditioning, surgical equipment and more. These items are considered part of the building, and are often costly to run, which is why tax refunds can be claimed on them. If the veterinarian has been overpaying a great deal of tax, then it is crucial for them to claim back the money they deserve.

Aside from the tax refunds, there are further benefits to making a claim on a surgery. If a successful claim is identified, then this could positively impact upon the value of the property, which will benefit the surgery owner if and when they come to selling their property.

The process of making a claim is an easy and stress free one, with minimum input from the property owner and maximum output from us, the capital allowance specialists. On average, we find over £100,000 worth of allowances on every property, and we have a 100% success rate with having claims accepted by HMRC. This is a truly risk free exercise that could bring fantastic benefits to the individual veterinary surgery owner and their business.

Who would have thought it?

Even those who don’t follow football cannot have failed to be aware of the incredible story of Leicester City’s triumph in becoming the Premier League Champions against odds of 5000 – 1. How on earth can a football team go from just about keeping their place in the top flight last season to running away with the title this year? Many people have put forward theories of how a club with a tiny budget can succeed against clubs who spend more on one player than Leicester did on their whole team. The word that keeps coming back into those discussions is the word team. By putting together not just good players but a group of people who work well together, whose strengths complement each other and whose combination as a group working with a common aim is so much stronger than any single individual can be.

Similarly, in Headley Meredith Associates we have a team of people who all have great individual skills but who rely on the combined strengths of them all. It starts with a business development team who are tasked with identifying potential clients and then gaining an understanding of the specific situation that client is in regarding their commercial property and identifying if that suggests they could benefit from a review of their potential for Embedded Capital Allowances. Explaining this complex subject in a clear and concise way requires a deep understanding of the subject matter and an affinity with the client specific situation.

Once the client has agreed to proceed it is imperative that our surveying team can identify accurately and comprehensively all items that qualify for relief and that the combined knowledge of our chartered surveyors and quantity surveyors put together an accurate report highlighting all items that qualify. Writing a detailed report of these they can then liaise with the technical tax team headed by our chartered tax advisor so they can interpret the results of the survey using all current and correct HMRC rules and guidelines.

The final part of the equation is the writing of the report itself by our chartered tax advisor. Where necessary our specialist will communicate with the client’s accountant and other professional advisors and in conjunction with his colleagues on the surveying side of our operation he will accurately and professionally produce a final report that we know HMRC will be happy with – we have a 100% acceptance record of reports submitted.

Our team works as a unit, focused on producing the correct outcome for the client that we know delivers them significant allowances that had gone unclaimed and that will benefit them both in the short term and the longer term from a reduced tax liability perspective. We don’t get an open topped bus ride around the town in the same way that Leicester City players will but we do get great satisfaction of a job well done and delivering on our promises.

Holiday Home Tax Refunds

Good news for holiday home owners! In these days of punitive stamp duty for buy to let owners and changes to mortgage requirements for those looking to invest in property, there is a tax benefit for holiday home owners that many are unaware of and few have taken advantage of.

If you own a holiday home or even a number of them and you pay tax on the income from those holiday homes in the UK then you could be missing out on a tax allowance that is enshrined in tax statute and yours by right – you just need to know how to quantify it. Providing your holiday home(s) is available to be let for at least 210 days per year and is actually let for at least 105 days per year then you could have a strong claim for Embedded Capital Allowances. As the name suggests these are items embedded in the property and forming part of its overall value when you bought it but that are able to be moved if necessary. It covers things such as radiators, heating systems, air conditioning, bathroom and toilet fittings, kitchens, security systems and much more.

Typically we would expect to find around 25% of the original purchase value of the property would be identified as allowable items which represents £125K of allowances in a £500K property which translates as £50K in tax refund and/or reduction in future tax liability to a higher rate tax payer. So it’s an exercise well worth doing.

You may ask “wont my accountant have already done this?” – the answer is almost certainly not. It’s a highly specialised area of tax statute and requires very specific knowledge of that area as well as a specialist team that includes a quantity surveyor, chartered surveyor and a chartered tax specialist. Very few general practice accountants have a team such as this and the job can’t be done properly without them.

We have the specialist team required working with us as part of our in house team and on a daily basis we are identifying allowances for our clients that are making significant differences to their tax liabilities both now and over the next few years. In most cases that includes a significant cash inflow immediately.

Best of all, it costs you nothing to find out. We can do a full review of your property on a totally contingent basis. In other words we only charge a fee if we successfully identify unclaimed allowances and those are accepted by HMRC  – our fee is 100% linked to a successful outcome. There is no upfront charge and you only pay once the benefit is confirmed. There is literally no risk to you.

April 2014 Deadline

Easter has come and gone and April approaches. Usually that heralds spring and the inclination to look forward to the summer but this year it heralds potential problems for commercial property owners who bought property in April 2014.

Under the changes to the HMRC rules related to the Finance Act 2001, the initial transitionary period ended and the fixed value requirement became necessary for all properties sold/bought after April 2014. The amount of Embedded Capital Allowances within a property had to be fixed and the apportionment agreed through the s198 to ensure there was no doubling up on claims. There is a period of 2 years allowed from the date of the transaction for the s198 to be submitted – if not then HMRC will set the allowances at zero – in perpetuity. They will be lost to all both now and in the future. That is potentially an expensive experience as these valuable allowances will be lost forever and in effect could devalue the property. From this point every month that passes sees more commercial property owners drop off the 2 year buffer and into the realms of mandatory zero setting of allowances – for good.

This is all so unnecessary as a full review using specialist Embedded Capital Allowances experts such as us can identify, quantify and report on allowances due, and present them in a way that HMRC accept and act upon. Its important that the rules are applied that are relevant to the particular property and relate to the rules that were in place when the property was originally purchased. If an accountant acting for a client who owns commercial property does not advise and assist them in this matter then they may well lose out considerably both now and in the future. They should look at this immediately regardless of which of the following categories they fit into.

  • If they own commercial property and have no plans to sell it they should ensure they benefit from the significant allowances that can be identified
  • If they are looking to sell commercial property that they own then they need to ensure that the Fixed Value Requirement is identified and set within the agreement and stated in the s198 document. That way they can probably get retrospective benefits as well as potentially use the remaining available allowances as a negotiating tool. Either way they are in control
  • If they are looking to buy a commercial property they need to ensure that the fixed value requirement is identified and set in any contract and the s198, or they risk having HMRC set it at zero so they can never claim it and defectively the property loses value.

The Finance Act 2001 has been around quite a while but the 2 year deadline that is about to become a reality will now start to negatively affect commercial property owners regardless so it important they review those allowances now.

It costs them nothing to find out as we will do a full review on a totally contingent basis – if there are no allowances then there is no fee. It’s so easy to do and so beneficial in most cases. Speak to your clients about this, put us in touch with them – we believe both you and they will be glad you did.

Be Honest – Do you understand the Laws of Rugby?

There is no doubt that with the Six Nations currently in full swing, rugby fever has gripped the nation and you cannot open a newspaper or switch on the radio or television without being overwhelmed by some obscure reference to an act or combination of events in a rugby match being analysed, dissected and assessed by experts, all of whom seem to have a different interpretation of what the outcome should have been. It does make it hard to see how any form of cohesive situation can come from it all and how any form of structure for the game can ever be possible. Even the referee at times finds it impossible to decide what did happen and what should happen next. So what does he do? He refers it to the Television Match Official or TMO who then, armed with copious slow motion re-runs and countless requests for a different angle arrives at a definitive answer. In those situations how many of us are amazed to find what we thought was obvious (a try – a foot not in touch – a pass going backwards) was in fact not the case and that with the ability for real analysis and review we can see he did drop the ball over the line or he did put his foot in touch or the ball did go forward. It certainly shows the value of reassessing a situation armed with all the facts and some specialised knowledge.

It’s very similar when we consider the situation regarding Embedded Capital Allowances in commercial property. These capital allowances are highly specialised and can be complex to identify and quantify. In many cases assumptions are made concerning the potential for them being available or the belief that the accountant handling the general accounting functions of the business will have done it already. Experience tells us that frequently that is not the case and in reality many successful and highly professional accounting firms prefer to refer this to their own “TMO” which in this field of taxation specialism is us. The accountant can deal with all aspects of capital allowances that can be seen or easily identified but when items are embedded in the building or are obscure items that are not easily recognised as qualifying then the best of the professionals involved may be unable to give fully informed advice and the best of those recognise the need to proactively involve specialists such as us to ensure their client is best served and best advised. If an international referee who is refereeing a rugby match in front of millions recognises they need specialist input then its just the same when highly professional and proficient accountants, solicitors or commercial property agents refer clients to us so we can use our highly specialised in house team to go through the review process.

This was very clearly seen only recently when an accountant who was aware of our services spoke to us about a client who owned a small care home group. They had not long taken over responsibility for the accounts and the client had never previously been advised of any potential for Embedded Capital Allowances. It was in fact an even bigger assumption than that as the client was convinced that nothing would be available and that it could be a costly exercise that would in the end deliver them no benefit. Nothing could have been further from the truth because it costs nothing at all to find out so it’s possible to have a full review at no upfront cost with fees being only charged once the exercise had been done and allowances identified and those then being accepted by HMRC. Once the client realised he would not be expected to pay anything if nothing was found he was happy to let us proceed even though he still felt we would find nothing. We got on with the job in hand, surveys were done, necessary documentation accessed and a report completed. Even though it involved 8 properties the whole thing was completed within a 10 week period and submitted successfully to HMRC. Allowances in excess of £1Million were found which resulted in significant repayments from HMRC with further tax reductions due over the next few years as the allowances continue to be used up. What looked like a situation that could not deliver any positive outcome for the client was in fact a situation that put valuable cash back into their care home business and will continue to help improve cash flow year on year for a number of years and all done with zero risk, no interruption of services and without involving the client in any disruption to their busy schedules. The lesson to be learned is never think it’s been done or that it can’t be done and always remember that finding out costs nothing and risks nothing – not finding out might though. Those who own any form of commercial property should really take heed and get in touch to get their own situation assessed for no cost, no commitment and no assumption.

We don’t know who will win the Rugby World Cup but we do know that making assumptions will never be part of influencing the outcome.