Most pension funds and non-tax paying entities are excluded from claiming capital allowances, as they are not subject to either UK income or corporation tax. However, it is still important that these entities do not ignore capital allowances in property transactions to ensure the value of any held asset is not reduced.
Pension funds and other non tax paying entities (such as charities) can still benefit from the capital allowances regime in the following instances:
- Selling- where capital allowances are still available in relation to the property. This may allow negotiation of a better sale price;
- Purchasing – eg, where the vendor may wish to retain capital allowances. In this instance, it may be possible to negotiate a lower purchase price, as the fund will not receive the benefit of the associated tax relief, and
- Future transactions – ensuring that procedures are put in place that would allow the benefit of capital allowances to be transferred to a new owner should the entity wish to sell the property in the future.
To maximise your capital allowances position you should consider capital allowances at an early stage of a transaction or redevelopment. Doing this will allow you to plan and enhance the tax relief available to you.
Claiming capital allowances is your statutory right! The benefits of claiming this relief to you are that not only will it will improve the cash flow of your business, lower risk for those supplying loans to the business but may also be used as a means to preserve and enhance the value of your asset.
Cavetta Consulting, can guide you through the capital allowances advantages and pitfalls, around these types of transactions. For more information on capital allowances download our guide.