Changes in tax legislation announced in the Chancellors Budget may remove the right of property owners to claim capital allowances unless detailed records have been kept or the value of any eligible fixtures are agreed between a se within a two year period after completion of a sale. Stuart Mitchell, Director, Holloway Iliffe & Mitchell said:
“The tax changes announced by George Osborne will affect any taxpaying entity that could have claimed capital allowances and currently owns a commercial property and sells the property after 1 April 2012. It will also affect any entity (such as a company, individual, trust, pension scheme, charity or unincorporated body) that buys a commercial property after 1 April 2012.”
In the majority of cases in the past companies have been able to claim a capital allowance on items of plant or machinery used as part of their business. Although there is no official definition of ‘plant’ there is a wealth of case law which allows advisors to have a good idea what constitutes plant and which items would not qualify.
As example, an owner of a business unit would be able to claim a capital allowance on a free-standing mezzanine floor covering most of the ground floor but would not be able to claim for a mezzanine floor which was part of the structure of the property.
Previously the law allowed purchasers of commercial property to claim capital allowances for qualifying fixtures that a previous owner has not claimed for, often many years after their purchase.
The Government has become concerned that property owners have been claiming capital allowances in excess of the original cost of the plant or machinery. Properties that are sold without an agreement of value of the eligible items for capital allowances will lose potential future tax relief resulting in increased tax liabilities.
Craig Powell, Associate Director, Holloway Iliffe & Mitchell commented:
“At present it is estimated 85% of commercial property owners have not claimed capital allowances on eligible plant or fixtures in their property. When selling commercial properties these clients may be able to negotiate a higher sale price if the value of these items can be agreed and the purchaser is allowed to claim this allowance to obtain tax relief on the eligible items included within the purchase price.”
The new regulations also provide an incentive to review all historic expenditure on property for unclaimed capital allowances, the benefit could be a reduced tax liability and an increased cash flow.
In the majority of cases in the past companies have been able to claim a capital allowance on items of plant or machinery used as part of their business. Although there is no official definition of ‘plant’ there is a wealth of case law which allows advisors to have a good idea what constitutes plant and which items would not qualify.
As example, an owner of a business unit would be able to claim a capital allowance on a free-standing mezzanine floor covering most of the ground floor but would not be able to claim for a mezzanine floor which was part of the structure of the property.
Previously the law allowed purchasers of commercial property to claim capital allowances for qualifying fixtures that a previous owner has not claimed for, often many years after their purchase.
The Government has become concerned that property owners have been claiming capital allowances in excess of the original cost of the plant or machinery. Properties that are sold without an agreement of value of the eligible items for capital allowances will lose potential future tax relief resulting in increased tax liabilities.
Craig Powell, Associate Director, Holloway Iliffe & Mitchell commented:
“At present it is estimated 85% of commercial property owners have not claimed capital allowances on eligible plant or fixtures in their property. When selling commercial properties these clients may be able to negotiate a higher sale price if the value of these items can be agreed and the purchaser is allowed to claim this allowance to obtain tax relief on the eligible items included within the purchase price.”
The new regulations also provide an incentive to review all historic expenditure on property for unclaimed capital allowances, the benefit could be a reduced tax liability and an increased cash flow.
