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Fantastic Results Found on Mixture of Properties

We have completed claims on many different properties in the past, however one of our most interesting claims was a client who owned various properties under one company, including retail properties, public house and an industrial estate. From the onset we knew that this client certainly had the potential for a substantial claim.

Typically within a retail property, around 20% of the original purchase price of the property can be identified as allowances, and the figures are around 32% for pubs and 15% for industrial estates, so on one property alone this client had the potential for a substantial claim, and adding two other properties made a combined property worth of £6,307,513. So we knew that this would be a very worthwhile activity for the client.

Within the property, we identified allowances on items such as sanitary ware, kitchen fittings, door closers, lighting systems, suspended ceilings boilers, security systems and more.

As expected, the allowances found were high, as we identified combined allowances of £1,701,650, which resulted in a hefty tax refund of £105,598 to the property owner. If the owner hadn’t employed us to identify a claim, they could have missed out on thousands of pounds of cash refunds and potentially continued to overpay large amounts of tax.

Some may think that it would be a lengthy and time-consuming process to claim such a level of allowances, however the reality was the complete opposite. We dealt with all the complicated details and communicated with HMRC to receive the refunds, whilst the property owner simply provided the basic details of the property and then just waited for their refund! Sound like an exercise worth doing? Get in touch with us today to see if you could make a claim.

Professional Dentistry exhibition

Here at Headley Meredith Associates, we’re no strangers to exhibitions and shows. Having been to numerous events, we understand the importance of attending these shows and meeting various industry professionals, which is why we’re excited to be going to Professional Dentistry in Glasgow this weekend.

We identify claims for commercial property owners within various industries, and so attending this exhibition will be a fantastic way to meet many professionals working within an exciting and rewarding industry. Since Glasgow is certainly not our neighbour, this will be a great way to meet dentists we might not have met otherwise from the Midlands, giving us the chance to introduce our specialist services to those who may be entitled a great deal of tax refunds and in an exciting and lively environment.

Many dentists may not have heard of the concept of Embedded Capital Allowances, and we want to help those who have not already make a claim receive the allowances they deserve. Many dentists own the surgery that they practice from, which means that a large amount of dentists have the potential to claim tax refunds on items within their surgery. By introducing our services in person, we will be able to discuss face-to-face the kind of items that would qualify for allowances within a typical surgery, as well as the general work we do.

Our friendly team will be at stand 11 to answer any questions about what we do and how we can help dentists. We hope to meet many professionals that could greatly benefit from a chat with our business development specialists who could determine whether they’re entitled to make a claim.  Even if people just want to glance at our stall, say hi or ask any kind of question, we’ll be there to help!

How much could an Embedded Capital Allowance claim be worth?

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 within 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 Artic 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 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 allowances 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, translating as £50k in tax refunds, which could have a big impact on an individual or business.

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Why Hotels can claim so much in Embedded Capital Allowances

We work with people from many sectors so we thought we would look at a specific sector to show how effective and in some cases business changing it can be to conduct an Embedded Capital Allowances review of the commercial property involved in the business. Of all the highly effective areas we can look at, hotels is probably the absolute pinnacle of potential due to the nature of the property used in such a business.

Embedded Capital Allowances are applicable to a host of fixtures and fittings embedded within a building when it is purchased and/or added after purchase. Items such as lifts, radiators, heating systems, cold water systems, air conditioning, suspended ceilings, bathrooms, kitchens, security systems and fire alarms. These represent just a few examples of items that are frequently part of a building when its purchased and included in an overall price paid for the building. They are also typical of things that are included in any refurbishment, improvement or extension that may be done after the initial purchase.  All of these things (and more) attract significant relief under the terms of the 2001 Finance Act but are rarely claimed because it is complex and requires a specialist team to identify and quantify the amounts that can be claimed. Those amounts are considerable with hotels frequently achieving over 30% of the original purchase price identified as relating to claimable items. So if you paid £500K for your hotel you have the potential of a £150K claim.

All of that is done on a contingent basis so you pay nothing until the work is done and only then a small percentage of the amount identified as allowances and subsequently accepted by HMRC. A safe and effective way to put cash back into the business now and in the future.

Does it work? Can Headley Meredith Associates really deliver on these promises?

Here is a quotation from a client we work with who is also an accountant.

“I can, without hesitation, recommend the services of Headley Meredith Associates. They have provided me with a first class service and I have found them to be extremely thorough, informative and proactive throughout.”

Carl A Hall – Financial Accounting Services Limited

This is a risk free exercise, has little or no disruption to your business and potentially offers the greatest benefit available compared to any other business. If you own a hotel then this should be seen as a natural part of your cash flow planning and fundamental to good financial management of your business. To find out more on a totally commitment free and no cost basis contact us here.

Is it worth doing an Embedded Capital Allowances claim?

Many people when looking at the issue of Embedded Capital Allowances feel that it may be more trouble than it’s worth.

Recently we visited a client who owned 5 properties that they rented out. You would think that a company engaged in the rental of commercial property would be fully aware of this tax legislation, but they had done nothing and as a profitable company dutifully paid their tax liability every year, moaned about the size of the bill and then just got on with it. They had an excellent accountant but that accountant was not experienced in this specialised area and had no resource available to do the work required in terms of surveying, interpretation and preparation of a report in keeping with the HMRC requirements applicable to their specific situation.

The client recognised there may be value to this but were concerned that it would embroil them in a workload that was not conducive to their existing level of work commitments. We assured them that was not the case and they agreed to proceed. We gathered some simple information regarding dates of the property purchase, a copy of their most recent full accounts and the details of their accountant – that was it! No further hands on involvement from them at all.

We scheduled a meeting with their accountant which took 45 minutes and we then conducted a survey of the properties concerned using our own specialised in house surveyors. Within 6 weeks we had completed the report and identified £1.4million in allowances – 20% of the original purchase value of the properties. This represented a tax repayment and reduction of future tax liability totalling £280K of which over £90K was by way of a tax repayment going back over the last two years tax they had paid. They also had a significant reduction in their current year’s liability as well as further reductions going forward over a few years.

The question “is it worth it?” is certainly answered there with a resounding “yes it is” and the concern it will take up the client’s time is clearly not substantiated as we do all the work required with minimal input from the client. All UK tax paying commercial property owners (corporate or individual) can benefit from this review and that figure of 20% of the total original purchase price is highly valid. Even a property bought at £250K is likely to have £50K or more in allowances so there is no reason why all commercial property owners should not look at having this done. We do the work – the client sees the significant benefit.

Why is CPSE 1 s32 Important?

The subject of CPSE 1 s32 can often lead to the glazing over of eyes when brought up as it’s a much talked about subject and yet the truth is that it still really does not seem to have sunken in just how important it is that it’s done correctly and it still gets fudged or even totally ignored. It’s important for all parties as failure to do so can have repercussions down the line that potentially are impossible to deal with.

So if you are involved in the buying or selling of commercial property in any capacity why should you concern yourself?

How does CPSE 1 s32 affect you?

Solicitors – quite apart from a duty of care issue there are also potentially litigation issues if CPSE 1 s32 is not handled properly. It was made clear in a Law Society article last year that it is the responsibility of the acting solicitor (for both vendor and purchaser) to ensure this matter is dealt with correctly. If it is not, it is eminently possible that a disgruntled client who loses out due to the two-year rule governing the s198 election may well seek compensation if they feel that they have materially lost out as a result of their acting solicitor not dealing with this matter as they should have done. At best it’s highly doubtful they would instruct the same solicitor again even if they don’t go down the litigation route. This is all the more frustrating as it can be handled so simply if a capital allowances specialist is involved from the outset.

Accountants – even though the solicitors may be seen to have the responsibility to ensure that this is all handled, a typical client will look to their accountant to advise and direct them correctly in matters to do with taxation. If an accountant is aware that their client is buying or selling a commercial property (or actually even if they have no transaction happening but currently own commercial property) then that client will have a level of expectation that their accountant will advise them effectively. All the accountant has to do is to suggest to the client that they involve a capital allowances specialist and they can be seen to be acting in that client’s best interest.

The Seller – It’s really a matter of control and opportunity. If the seller establishes the level of capital allowances available in the property it becomes a strong selling point and certainly one that can be leveraged in negotiation. It adds value to the property and ensures the seller controls how that added value is used within the sales process.

The Buyer – if the seller has not done this exercise and as is often the client is unaware of it, if the buyer takes control before the contract process it’s perfectly possible for them to get agreement as part of the contract that they can conduct this review and therefore they can benefit from any allowances identified. It also ensures that the seller will cooperate with the supply of information if it forms part of the contract that they should do so. This massively smooths the way for conducting the review after the sale has completed.

So there you are, the solicitors. The accountant, the seller and the buyer all have very strong practical and economic reasons to ensure this review is done as it should be. They need to engage with a capital allowances specialist earlier rather than later in the process.

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.

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.