1. Surely my accountant will have already dealt with any relevant capital allowance claims?
There is a very high possibility that your accountant will have only submitted claims for expenditure on the most obvious lower value items such as carpets, curtains, fire extinguishers etc. Specialist legal, surveying and accounting expertise are needed to be able to successfully make a capital allowance claim as when a building is purchased, there are often no receipts passed on for the integral features.
We work directly for property owner-occupiers and investors to maximise their tax savings, alongside their accountant.
2. What if it leads to an enquiry by HMRC?
Firstly, capital allowance claims are legitimate forms of tax relief as documented in the Capital Allowance Act 2001. As a result HMRC are used to dealing with these.
CPA Tax have never had an enquiry made by HMRC. Our head surveyor has been doing capital allowances since 1984 and has established an excellent relationship with HMRC.
3. I bought my property several years ago. Can I still claim?
Absolutely. As long as you are still in ownership of the property, there are no issues claiming on older purchases.
4. How will capital allowances benefit me or my business?
Whether you are profitable or not it is always advantageous to identify capital allowances for the following reasons:
If you’re not profitable in certain cases it is possible to defer the reliefs until they are required.
If you are profitable then capital allowances can be off set against other income or profit streams generated for the company.
Capital allowances may result in significant tax rebates from HMRC.
5. Will this affect my capital gains tax or reduce the value of my property?
No. If you sell the property in the future it does not affect your capital gains liability or reduce the value of the property.
Taxation of chargeable gains act 1992 – Section 1 states:
‘It is not necessary to deduct any CA from the cost of an asset for capital gains purposes. So it is not possible for a CA claim to create or increase a chargeable gain.’
6. Is this a tax scheme?
No, it is a statutory exemption, written in law under the Capital Allowance act 2001 and is a legitimate form of tax relief for commercial property owners.
7. What is plant and machinery?
There is no accepted definition of what constitutes plant or machinery by HMRC. Machinery is more obviously identifiable but plant is much harder to classify. Many items in a commercial building are overlooked because the specific legislation has changed, and the current interpretation of the law on capital allowances is based on various stated cases.
Some examples of what may qualify for Capital Allowances are shown below, although the facts of each case have to be looked at individually.
8. Can I claim on a property abroad?
For tax allowance purposes [yes] a property overseas is classed as commercial, but there is a basic criterion: The property must be a furnished holiday let in the UK or an EU country. The owner must be a UK tax payer. The rental income must be declared on your tax return. The property must be let out for more than 105 days each year and available for more than 210 days per year. The property can be anything from an apartment to a villa although the purchase price must have been at least £300,000 on an overseas unit. The typical values of capital allowances for qualifying furnished holiday homes would typically be between 15% and 35% of the purchase price of the property.
9. I want to sell my property shortly after claiming the capital allowances, am I allowed to do this?
The short answer is yes, as long as you are able to show intent that the building was initially an investment property for which you intended to derive a rental income before you sold it and as long as the capital allowances are claimed within 1 year of purchase.
10. What is an annual investment allowance and when is it available?
An Annual Investment Allowance (AIA) is given in the year that the expenditure is incurred on plant and machinery, 100% of which can be claimed in the first year, allowing for massive immediate potential tax savings. The AIA is for a fixed amount and writing down allowance (WDA) can also be claimed in the same year.
The AIA is now at £500,000 up from £250,000 since April 2014.
11. How long does the whole claim process take?
The ‘claim process’ involves the signing of an engagement letter, collation of the necessary information (sale and purchase agreements, completion statements, cost information, etc.), a survey of the property, preparation of the claim and then submission of the claim to you and/or your accountant. This can take as little as two weeks but more realistically we would expect it to be between six and eight weeks.
12. Why should I use you?
Why wouldn’t you? We absorb all the initial costs and won’t charge a penny unless we can make a successful claim.
Furthermore, our expertise in this field means that you are in the best hands. Our multi-disciplinary approach enables us to be very thorough in our surveys and identify capital allowances where more junior surveyors would not.
13. What happens if I claim capital allowances and then want to sell the business that owns the property?
Capital allowances stay with the entity that owns the property, so the capital allowances would be passed on when the business is sold. However, this is a useful bargaining chip as capital allowances create a DTA (deferred tax asset) on the balance sheet, meaning the new business owners can enjoy future tax savings and this can add significant value to the business being sold.
14. How much do you charge?
Our pricing is bespoke but fair. It all depends on the on the size of the property portfolio and the amount of work that has to be undertaken by our surveyor. We only take our fee once the report has been submitted to HMRC and a rebate/tax saving has been received – essentially on a no win no fee basis.