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Budget 2018: Capital Allowances
In this year’s budget there was some good and definitely unexpected news, for those owning and investing in commercial property.
As the 2018 growth forecast is upgraded from 1.3% to 1.6%, the message for companies from the Chancellor was that the UK is very much open for business, with new incentives for investment in plant, equipment and buildings.
Status Quo For The Meantime
Following a consultation period, what did the Office of Tax Simplification decide was the way forward with the capital allowances regime.
SSE Generation Limited v HMRC
This this case shows that the definition of what is and what isn’t “plant” is very far from clear and each case should be reviewed on its own merits and HMRC guidance shouldn’t be taken at face value
Dundas Heritable Limited v The Commissioners for HMRC
An interesting First-Tier Tribunal (FTT) case, that could have us rethinking what the time limits are for making capital allowances claims, and allowing them to be made, no matter how late the tax return.
When you buy or develop fixed assets, such as property, you cannot simply deduct the expenditure in calculating your business profits. However, you may instead be able to claim Capital Allowances based on the expenditure.
Claiming capital allowances in Ireland
Over time, tax relief associated with designated incentive Schemes within Ireland has been phased out. So if investing in Ireland, it is worth considering other ways of minimising tax to be paid on any rental or trading profits. One of those methods is their very generous Tax Depreciation regime.
Are You Getting the Tax Relief You are Entitled to When Trying to Be Green In Business?
The Office of Tax Simplification is inviting contributions on the future of Capital Allowances. This change will affect those who claim capital allowances in relation to the fixtures, fittings plant and machinery contained within the commercial property that they own or lease. A change in the rules will mean that capital allowances may be replaced by a system based on accounting depreciation.
Simplification, Or Back To Square One?
Driven by pressure from customers, employees, a raft of environmental legislation and concerns of local communities, an increasing number of businesses are introducing measures to reduce their impact on the environment. However, there are also sound business reasons for adopting green measures.
Capital Allowances, Refurbishments, Dilapidations and Service Charges
When considering refurbishing a property and how to fund it, the tax implications should be investigated thoroughly by property investors and owners. For a property investor or owner, property refurbishments offer plenty of scope to claim tax deductions. As well as the far wider definition of plant and machinery for Capital Allowances in the case of refurbishments than other types of property expenditure, there is also the possibility to claim a full deduction in the year of expenditure for repairs and maintenance.
Effects of the 2014 “Pooling requirement”
The Finance Act 2012 introduced new rules on capital allowances (CA’s) for sellers and purchasers but it wasn’t until the April 2014 that the full effect of the “pooling” requirement was felt. We have been working with Richard Whittaker of Incentax Limited to look at the effects, so, 18 months and some 100 purchase claims later how are the new rules affecting claims.
Expenditure – Capital or Revenue
Unfortunately, there is no simple test for, any statutory definition or guide of what is determined as capital or revenue expenditure, and this is acknowledged in HMRC’s Capital v Revenue Toolkit
Guidance initially will come from legislation and then from the case law that has evolved around the definitions of capital and revenue expenditure. In addition, the accountancy treatment may be of assistance in the determination but the tax treatment is always a question of law determined by the facts of each individual case.
Although we need to remember that a sum that, would be capital expenditure in the hands of the payer is not necessarily a capital receipt to the recipient.
JD Wetherspoon v HMRC
Many technical areas that were under appeal in this case are pertinent to all taxpayers incurring capital expenditure on property, so this case has wide- ranging ramifications.
Land Remediation Relief
In the early part of the millennium, the government set itself a target of increasing the housing supply by 200,000 by 2016. As part of the overall strategy to increase the confidence of investors and developers to utilise contaminated land, instead of further eroding the greenbelt, the government introduced Land Remediation Relief in 2001.
This provides corporate developers and investors with the opportunity to claim up to 150% of the additional costs of dealing with contaminated land and buildings including the costs of “preventing, minimalising, remedying or mitigating specific pollution causing harm to land or the quality of controlled waters, as tax relief.
Telfer v HMRC
An employee’s tax case concerning claiming capital allowances on expenditure on two caravans may appear to have no relevance to many of our readers. However, this recent case is a reminder that we cannot assume what will qualify as plant and machinery based on prior claims, we must always go back to first principles.
The Annual Investment Allowance
The Annual Investment Allowance (AIA), which gives 100% relief on capital spending on such items as plant and machinery and fixtures (but excluding cars) is a useful mechanism for accelerating tax relief for many businesses.
It provides a genuine simplification of a very complex tax system, in that, most expenditure on plant and machinery can be written off for tax purposes from the outset rather than requiring writing down computations to be carried forward. However, on the 1st January 2016, the current generous 100% AIA of £500,000 is being reduced to a somewhat less generous £200,000.
When Is A Repair Not A Repair – Replacing Integral Features
The repair and renewal of fixtures within a commercial property used to be a relatively simple matter for tax purposes. However, the introduction of the concept of “integral features” has now complicated matters. In this article we explain the tax implication of this new definition.