Capital Allowances on Commercial Property Transactions
Have you identified ALL the Property Capital Allowances and the likely tax savings that could be available in the property? Because of the new law (Section 198/199 Capital Allowances Act 2001/ Finance Act 2012) it is vitally important that anyone entering into a commercial property transaction is properly advised about their ability to claim Capital Allowances or the opportunity will be lost forever.
Sanders Witherspoon LLP is able to offer assistance to clients in relation to reclaiming tax allowances available to all Commercial property holders who are UK tax payers. These can include Limited Companies and Partnerships.
WHAT ARE PROPERTY CAPITAL ALLOWANCES?
Property Capital allowances allow commercial property owners to recover certain items of capital expenditure as a tax deduction (though very often this can amount to a tax rebate) and are a valuable and relatively uncontentious tax relief. Not all property expenditure is capable of qualifying and the amounts of any deduction can vary significantly (typically ranging from 5% to 100%) depending on property type and use.
HOW MUCH COULD MY CLAIM BE WORTH?
This depends on a number of factors including how much you paid for the property and what it is used for. By way of illustration it is common that anywhere between 20% – 45% of the purchase price of a property would be allowable. For instance, if you paid £500,000 for your property you may have £150,000 allowances available which would then be calculated at your applicable tax rate i.e. 40% equals £60,000. This ‘net benefit’ is then either offset against future tax, or previous tax paid by way of an immediate rebate.
SURELY THE SELLER HAS CLAIMED THEM ALL?
The answer we find is usually NO!
Research has shown that over 90% of commercial property owners have not claimed the full value of their Property Capital Allowances and most of the clients we speak to are unfamiliar with the expression. What is even more worrying is that their accountants are unfamiliar with the expression!
This means that it is very unlikely that the seller will have claimed their Property Capital Allowances. If at completion of the contract these very valuable tax benefits have not been identified correctly then both parties could lose them forever.
Prior to exchange of contracts it has now become crucial that the issue of Property Capital Allowances is considered, (whether we are acting for the buyer or the seller). At Sanders Witherspoon LLP our team of Commercial Solicitors are fully aware of how to ensure the maximum tax advantages for every commercial transaction and we are here to help you.
Because Property Tax Law around Capital Allowances is so complex, we work with a specialist team of accountants who have a ten year record of submitting successful claims to HMRC. They help our clients and our client’s accountants with Capital Allowance advice and property surveying expertise. We use their proven experience to help either sellers or buyers achieve the maximum tax efficiency in every transaction.