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Property embedded Capital Allowances: A summary for 2015/16

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Background

Capital Allowances (CAs) should be at the forefront of all commercial property owners minds. Generally, such claims will be in relation to so-called property embedded fixtures and fittings. In other words, fixtures and fittings acquired with the building and / or certain expenditure on refurbishment of a property.

For more information on CAs generally please contact us.

Summary

It is possible for a valid claim to be made resulting in the benefit of a historic CA claim being offset against two years’ worth of tax liabilities. This may take effect as a repayment from HMRC and / or a reduction in the next years tax bill.

Under general principles, a claim should be made on a ‘real time’ basis. In other words, when it is clear that a commercial property owner acquires a commercial property and incurs expenditure on the property embedded fixtures and fittings.

Planning for 2015/16

As we are now a couple of months away from the 2015/16 tax year you will find some quick tips on making a claim (if you are a property investor) or helping a client make such a claim:

  • From 2015/16, the ability to amend tax returns from 2013/14 will be lost. This means that processing a claim for non-corporates between September and December of this year (2015) will secure the benefit. This will allow a claim to be made against the liability for 2013/14.
  • A claim successfully submitted for such a person before September is likely to result in a refund for the latest tax bill and allow for any allowances to be included the 2014/15 tax year.
  • Practically speaking, for 2015/16, we would recommend that an adviser with a portfolio of corporate clients looks for those companies with a year ending months down the line. This will allow a feasibility report to be done, the required ground work and a claim to be made in time.

The ‘perfect storm’?

Historically speaking, The Annual Investment Allowance (AIA) is at its highest ever level (£500,000). In the 2015/16 tax year the ‘perfect storm’ for a valuable and attractive CA claim would be for a property purchased in 2013 and 2014.

Why is this a ‘perfect storm’? Well, such circumstances would allow for both a historic claim and the use of allowances of up to £500,000.

For example, an office that was purchased for £250k may have £62.5k of CAs in respect of the inherent fixtures and fittings. These can be written down in full if there is a balance of AIA available.

As such, a CA claim on this bases would be worth £25k, assuming they were 40% taxpayer.

 

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