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The main benefit of claiming capital allowances is that it can improve your cash-flow as a taxpayer. Indeed, in some circumstances, taxpayers may be eligible to receive a payable tax credit from HM Revenue and Customs
A taxpayer who actively claims and maximises their statutory capital allowances entitlement, can generate a number of secondary benefits for their business including:
- Allowing further development of the business – with more working capital at their disposal, a taxpayer can make further investments, improve other areas of the business or save the spare cash for more trying times.
- Lowering the risk of investments. – by having more cash available to pay lenders, the risk of the investment in the eyes of the lender is lowered, therefore allowing the business to negotiate more favourable terms.
- Improving yields and viability
For many years now, HM Revenue and Customs have frequently stated that a significant amount of Capital Allowances and Land Remediation Relief that could have been claimed is, without good reason, not being claimed.
The opportunity to maximise tax savings is often lost because the immediate priority of those driving the development is to complete that project and move on to the next one. In addition, tax relief is often seen as a frightening subject for most developers and professionals, and more often than not, perceived as being the responsibility of “someone else”.
In our experience, 90% of claimants do not plan the tax efficiency of their developments, refurbishments and fit-outs and therefore miss out on the higher rates of tax relief. Those 100% and 150% reliefs that are available, and in some instances, potential repayments from HM Revenue and Customs.
The main benefit of planing to make a development tax efficient is to improving cash-flow. In addition, Investors may make their development more attractive to potential tenants by having energy efficient buildings which translates to low running costs for tenants.
Also, developers holding the property as trading stock can actually enhance the potential sale value of their development, in situations where a purchaser acquires a new and unused commercial building containing energy and water saving technologies that qualify for Enhanced Capital Allowances.
To ensure that the maximum tax relief is achieved it is important that the following reliefs are considered and planned for:
- 8/18% Plant and Machinery Allowances
- 100% Enhanced Capital Allowances
- 100% Repairs and Maintenance
- 150% Land Remediation Relief (for companies)
A proactive approach to claiming Capital Allowances can bring owners of commercial property interests the benefit of preserving and enhancing the value of that property. This is achieved in a number of ways:
- Adopting a tax efficient energy efficient approach can boost the sustainability of the asset. This is a useful component when considering the life cycle cost of an investment.
- By informing the commercial property market that unclaimed capital allowances may be available, this may help to generate demand in the property you are trying to sell; which in turn may enhance or preserve the sale price realised for that property.
- Mitigating the amount of tax that has to be paid allows a property owner the funds to continue to enhance and improve their building
In addition, when selling commercial property it is possible to retain all the tax relief generated during your period of ownership.