The role of advisers in 2014 will continue to be to steer their clients in the right direction on the road to recovery, and take advantage of any financial advantages and incentives for their clients in the coming months. In the commercial property sector, this advantage comes in the form of capital allowances, which have gone largely unnoticed and unclaimed by the advisers of commercial property owners.
Due to unclaimed capital allowances, there is significant tax relief available to the owners of commercial property. And in the current climate, a windfall could be just what the owners of these properties need in order to bolster their businesses.
What are capital allowances?
In simple terms, capital allowances are tax relief available to anyone who incurs capital expenditure buying, building or refurbishing commercial property. In short, they are a means of reducing your tax bill.
Research tells us that more than 90 per cent of UK commercial property owners will be owed tax relief in the region of thousands, or even tens of thousands, of pounds. And this is applicable to most commercial buildings.
Our estimate is that the amount capital allowances that are currently sitting unclaimed within commercial property is in the region of £70 billion. And whilst Catax Solutions often work with larger companies in order to help them realise their tax relief, it’s equally important for smaller business owners to be aware of how to claim.
The bigger picture – what tax relief looks like
For commercial property owners, there’s a great awareness of the expenditure involved in fitting these items given the need for extra electronics, lights, sprinkler systems, air-con and plumbing in their premises.
For one property in purchased at £417,150, a total of £93,362 in capital allowances were identified – an overwhelming benefit to the owner. This can be broken down into the following items: disposal and foul water drainage installations (£7,343), heating installations (£23,249), ventilation installations (£6,820), electrical installations (£21,087), communication installations (£7,574) and fixed internal fittings (£22,426).
Why advisers must act now
Every commercial property owner in the UK must act now. This is because after a two-year transitional period, the 2012 Finance Bill will finally be implemented on 1 April 2014.
From this date, unless unclaimed capital allowances relief is identified and documented at the point at which commercial properties are bought or sold, it will be lost forever.
And the impact for advisers who fail to do this? A client who has not been informed of these very significant changes to legislation after April will understandably be well within their rights to seek compensation. And this may result in very messy litigation for advisers – be they accountants, IFAs or lawyers.