Low Awareness Of New Capital Allowances Tax Legislation

Property Industry Set To Lose Out

07.03.2014

Alex Barnes, Partner | +44 (0)207 400 8780

Millions of pounds could be lost due to low awareness surrounding a significant change in capital allowances legislation which comes into force in April 2014.

Capital allowances provide UK commercial property owners with the ability to claim tax relief on items that are fixed to the property such as heating, air-conditioning systems and lighting.

These allowances can be deducted from the owner’s taxable profit, which in turn reduces their tax bill.

The new pooling requirement could mean that any uniformed or poorly advised purchasers of property could lose out on their right to claim capital allowances on the fixed plant and machinery transferring with the property. This could have an impact on the future value of the property if the allowances are not available.

Commenting on the change, Graham Burrell, Head of Capital Allowances at CBRE said:
 
"Although capital allowances are quite high on the pecking order of priorities when acquiring commercial property, their importance should arguably ascend to the most urgent.  Inadequate advice during the due diligence stage could prove to be very costly for both parties.

"Clearly the effects on the industry are far-reaching. We expect to see a shift in the way capital allowances are dealt with prior to transactions taking place, and we may begin to see the effects on market values of properties; particularly those where the allowances may have been lost."

Expert Opinion
This is a significant change to capital allowances and if someone is buying or selling commercial property, it is vital that they do the correct due diligence and draft their contractual documentation appropriately.

“The value of capital allowances can be considerable and it is vital that businesses who are concerned about capital allowances seek out expert property tax advice right at the beginning of any real estate transaction.”
Alex Barnes, Partner