Following changes to the capital allowances rules that came in to force from 1 April 2014, commercial property owners, whether buying or selling, could permanently lose this valuable tax relief.
What’s the issue?
Following changes to the capital allowances rules that came in to force from 1 April 2014, commercial property owners, whether buying or selling, could permanently lose this valuable tax relief. From this date, HMRC has introduced a raft of additional requirements that will need to be met for all commercial property transactions, to prevent any unclaimed allowances being forfeited.
Timing is Critical
After 1 April 2014, if you sell a commercial property without having identified the available allowances and claimed them in your tax return, the unclaimed allowances are lost to you, the purchaser and any future owner of the property. For good.
Who is Eligible?
Owners of UK commercial property can claim tax relief on items that are ‘fixed‘ to the property and that that qualify for capital allowances. This includes expensive items such as lighting, air-conditioning and heating systems. These allowances can be deducted from the property owner’s taxable profits, irrespective of whether the property is used as a trading base for the owner’s business or simply held as an investment. Since it is thought that many property owners have not taken advantage of this relief, it is possible that billions of pounds deductions are being missed.
Actions to consider
When undertaking any property transaction, ensure that you conduct a full audit of the capital allowances history of the property, prior to the transaction. This helps both parties: it maximises the amount of allowances that a purchaser can claim and helps the vendor maximise the sale value.
Ensure that all of your professional advisers are up-to-speed on the new regulations. This will help to avoid losing allowances anywhere in the transaction ‘chain’.
How we can help
Existing property owners: We recommend that all property owners consult with their advisers to conduct a thorough audit of their portfolios as a matter of urgency. This way, any allowances can be quantified and included in your current tax return.
Prospective property owners: If you are considering a transaction, contact us for advice on the capital allowances position, as part of the purchase process.
For further information please contact Yildiz Betez.