Property Acquisitions - Maximising Property Tax Relief
At Ċavetta Consulting, we can ensure when purchasing any property your tax position is maximised. We do this by providing you with not only capital allowances valuations services but services relating to due diligence and entitlement reviews.
Traditionally, consideration of capital allowances was often left until after the purchase of a commercial property. Indeed, before 2012 in some instances, it was better not to raise the subject of capital allowances at all. If the contract was silent on the matter, it could be a significant advantage to the purchaser.
However, since the changes to the capital allowances legislation in 2012, establishing entitlement to capital allowances in a commercial property transaction before completion has become far more important. If your purchase contract does not deal with capital allowances, the tax savings can be lost if the “pooling requirement” and “fixed value requirements” are not complied with.
Property Acquisitions Due Diligence
Where we are involved before the transaction takes place (ideally before the heads of terms are agreed) our work will involve the following:
- reviewing the vendor’s capital expenditure on the property during their period of ownership to establish whether they have claimed the full amount of their qualifying capital expenditure.
- reviewing the S198 CAA 2001 election, to ensure that it is correctly drafted, and includes all the relevant items.
- reviewing the replies to CPSEs, to ensure that they provide the relevant level of detail and appropriate confirmations.
Capital Allowances Entitlement Reviews
Our work will initially involve establishing whether you are entitled to claim capital allowances for the property under consideration.
This process has been simplified following changes to legislation in 2012, relating to claiming capital allowances for fixtures contained within a commercial property. However, further issues can arise, if due diligence is not carried out on the capital allowance information provided by vendors.
The main components of our services at this stage will involve:
- looking at how the disposal has been structured to ensure that it was carried out in such a manner that allows the buyer to claim allowances.
- establishing whether a prior owner of the property has claimed capital allowances. This will involve, establishing the historical ownership of the property back to 24 July 1996, locating the prior owners and confirming whether or not they have claimed.
- obtaining all necessary prior capital allowances elections, including S183 CAA 2001 elections where a premium was paid to a taxpayer who granted a long leasehold interest.
- examining whether a prior vendor could have claimed Industrial Buildings Allowances (including Hotels) or any other allowance that could impact on making a claim for capital allowances.
Capital Allowances Claim Preparation
Where you have appointed us, and we have established that the purchaser is entitled to make a claim, we shall prepare a claim based on an apportionment of the purchase price.
This will involve visiting the property to confirm what qualifying items of plant and machinery are included within the building and using our specialist surveying skills, value the items of plant, replacement cost of the building and the land on which it exists.
Our valuations are undertaken in accordance with the guidelines set out by HM Revenue and Customs and the Valuation office agency.
Our service to you also involves negotiations with HMRC, in the unlikely event that they raise a query on the valuation.
For further information on how Cavetta Consulting can assist, download the attached brochure.
