Capital Allowances
How we can Help

Details of the various types of Capital Allowances are summarised on the side bar “About Fiscal Incentives”. We aim to support our clients at every stage of a project’s lifecycle from the initial development or acquisition stage through to the eventual sale or redevelopment of a building. Value can be enhanced or needs to be protected at every stage of a project so an isolated approach that focuses only on one stage is likely to leave you exposed to unexpected risk and uncertainty.

Outlined below are the key issues that need to be considered at each stage of the project lifecycle to ensure the capital allowances benefits are maximised.

Consultancy Services
+ Pre-acquisition Advice – Second Hand Properties

Pre-Acquisition Advice – Second Hand Properties

The Issue: Capital Allowances can play a key part in the decision to invest in property as the ability to shelter taxable profits has a marked impact on return on investment. From April 2014 the purchaser’s entitlement to capital allowances is dependant almost entirely on the actions of the seller. Failure to enforce an obligation on the seller to provide the necessary information is likely to prevent a claim for the purchaser. Non-tax payers also need to be aware that they will be expected to have taken action to preserve the availability of allowances for future owners.

How we Help:

  • We confirm the entitlement to claim capital allowances.
  • We liaise with your legal team to make sure that responses to the CPSE section 32 enquiries eliminate uncertainty.
  • We advise on what clauses and warranties are needed in the sale agreement to protect your interests.
  • We confirm the scope and estimated value of your entitlement to claim capital allowances.

Benefit to the Client:

  • Empowered: Provides you with a stronger negotiating position.
  • Reassured: That the maximum amount of allowances can be claimed or preserved.
  • Protected: The contractual obligations of the seller are properly recorded.

Why use the TFI Group?

+ Pre-Acquisition Advice – New Investment Properties

Pre-Acquisition Advice – New Investment Properties

The Issue: The purchase of a brand new building presents the best opportunity to claim capital allowances as no one else will have become entitled to claim the allowances yet. However, this means the first owner should ensure it acquires the relevant interest in land and builds up the capital allowances value by obtaining all available design and specification details and by carrying out a cost segregation exercise to apportionment of the purchase price in accordance with the Act.    

How we Help:

  • We confirm that you have acquired the correct interest in land to claim the allowances.
  • We confirm what information is required from the developer to support your claim.
  • We confirm the scope and estimated value of your entitlement to claim capital allowances.

Benefit to the Client:

  • Empowered: Provides you with a stronger negotiating position.
  • Reassured: That the maximum amount of allowances can be claimed or preserved.
  • Protected: the contractual obligations of the seller are properly recorded.

Why use the TFI Group?

+ Entitlement Reports

Entitlement Reports

The Issue: On complex development projects or transactions involving multiple stakeholders and legal entities it can sometimes become unclear who has entitlement to claim any available tax incentives.

How we Help:

  • We review the structure, the ownership history and confirm where entitlement sits.
  • We confirm the scope and estimated value of your entitlement to claim capital allowances.

Benefit to the Client:

  • Empowered: Provides you with a stronger negotiating position.
  • Reassured: Allows you to confidently factor the benefit of the incentives into the investment decision.
  • Protected: Allows corrective action to be taken if your entitlement is threatened.

Why use the TFI Group?

+ Tax Intelligent Procurement

Tax Intelligent Procurement

The Issue: Claims are most often considered after the expenditure is incurred meaning that any opportunities for designing and procuring in a more tax efficient way are lost, typically resulting in suppressed claims. This is particularly relevant for projects that involve high levels of mechanical and electrical installations and fit out expenditure that is heavily related to an occupier’s trade.

How we Help:

  • We guide the design team through the eligibility criteria to claim the various types of allowances.
  • We review the project to highlight the areas where allowances can be enhanced.
  • We advise on procurement matters to ensure that all the relevant information is available to prepare the claim.

Benefit to the Client:

  • Connected: Tax teams and design teams aligned towards a common goal.
  • Protected: A suite of project documents that fully support the claim, making the claims more robust in the event of an enquiry from HMRC.
  • Improved cash flow: A project that realises the full potential for tax relief.

Why use the TFI Group?

+ Lease Incentives - Contributions

Lease Incentives – Contributions

The Issue: When negotiating lease incentives one option is for the landlord to contribute towards the tenant’s fit out costs. These contributions can attract valuable allowances and reliefs but these can be lost if the lease agreement is not drafted properly.

How we Help:

  • We advise the parties on the best way to structure the contribution to achieve the desired outcome.
  • We liaise with your legal team to highlight the key issues to be addressed in the agreement to lease.

Benefit to the Client:

  • Improved cash flow: A contribution that is arranged in the optimum way for both parties.
  • Protected: The contractual obligations of the parties properly recorded.
  • Good governance: For non-tax payers an ability to capture valuable tax benefits to pass onto subsequent purchasers.

Why use the TFI Group?

+ Sales Aids

Sales Aids

The Issue: The availability of capital allowances can improve the return on investment or the viability of a capital investment but sellers still fail to fully promote the inherent tax benefits to potential purchasers, especially in instances where the seller could not benefit from the tax relief themselves (developers/non-tax payers).

How we Help:

  • We provide sellers with an estimate of the allowances available to a taxpaying buyer.
  • We provide a Sales Aid report for marketing purposes detailing the entitlement and benefit likely to be derived by a buyer.

Benefit to the Client:

  • Marketability: Increased value and attractiveness of the investment.
  • Protected: Removes the possibility of a post transaction dispute caused by misleading or incomplete information.
  • Empowered: Provides you with a stronger negotiating position.

Why use the TFI Group?

+ Pre-disposal Advice – Second Hand Properties

Pre-disposal Advice – Second Hand Properties

The Issue: Typically the seller of a building who had entitlement to claim capital allowances must account for a plant and machinery disposal value when the building is sold. Failure to secure an agreed allocation of the available allowances with the buyer can leave the seller exposed to suffering a full disposal value and facing a clawback of the tax relief enjoyed during its period of ownership.

How we Help:

  • We review the capital allowances claim history and advise on disposal strategy.
  • Where appropriate we prepare a claim to enable the seller to pool its entitlement and declare its disposal value.
  • We prepare full and frank responses to the standard CPSE section 32 enquiries.
  • We prepare all necessary written notices where the seller was not entitled to claim allowances.

Benefit to the Client:

  • Added Value: Increased value and attractiveness of the investment.
  • Reassured: Removes the possibility of a post transaction dispute caused by misleading or incomplete information.
  • Empowered: Provides you with a stronger negotiating position.

Why use the TFI Group?

Preparing Claims
+ Acquisition Of Second Hand Property

Acquisition Of Second Hand Property before 1st (or 6th) April 2012

The Issue:  A buyer may be entitled to claim allowances on that part of the purchase price that relates to qualifying plant and machinery fixtures within the building. However, the buyer must first confirm whether any prior claims made by a previous owners since 24th July 1996 could restrict their entitlement to claim.

How we Help:

  • We review the capital allowances claim history of the property.
  • We advise you of any restrictions that apply resulting from previous PMA claims and work with the seller as necessary to agree an allocation of the available allowances between the parties.
  • We carry out a cost segregation exercise to identify the portion of the purchase price that relates to unrestricted PMAs.
  • We separate the PMA assets into their pools so they are claimed at the correct rate.

Benefit to the Client:

  • Reassured: The full entitlement to capital allowances identified, secured and valued.
  • Improved cash flow: Higher post tax returns.

Acquisition Of Second Hand Property between 1st (or 6th) April 2012 and 31st March (or 5th April) 2014

The Issue:  Where a previous owner has claimed allowances on plant and machinery fixtures, the buyer has two years in which to either agree a disposal value with the seller, to have a tribunal determine such a disposal value or, where the seller was not entitled to claim, obtain a written statement from them setting out the disposal value inherited from a previous owner. This leaves only a narrow window to establish the buyer’s entitlement to claim or to protect the value of available allowances for future owners.

How we Help:

  • We verify the responses to CPSE enquiries and review the effectiveness of the capital allowances clauses in the draft sale agreement to confirm the value and nature of the available PMAs.
  • We advise on the potential scope of the PMA claim and any time limits that apply.
  • Where necessary, we work with the seller to agree an allocation of the available allowances between the parties or we prepare an application for a Tribunal to determine the necessary disposal value.
  • We prepare an election to document the agreed disposal value.
  • We carry out a cost segregation exercise to identify the portion of the purchase price that relates to unrestricted PMAs.

Benefit to the Client:

  • Reassured: The full entitlement to capital allowances identified, secured and valued.
  • Protected. Removes the possibility of a post transaction dispute caused by misleading or incomplete information.
  • Improved cash flow: Higher post tax returns.

Acquisition Of Second Hand Property on or after 1st (or 6th) April 2014

The Issue:  Where the seller was previously entitled to claim allowances on plant and machinery fixtures, irrespective of whether they did claim, the buyer’s entitlement is restricted to the seller’s disposal value. If the seller is a non-taxpayer the buyer’s entitlement is restricted to the disposal value of the last tax paying owner prior to the seller’s ownership (if any). Generally, the seller must make a claim and agree a disposal value to establish the buyer’s entitlement to claim or to protect the value of available allowances for future owners 

How we Help:

  • We verify the responses to the CPSE section 32 enquiries and review the effectiveness of the capital allowances clauses in the draft sale agreement to confirm the value and the nature of the available PMAs.
  • Where necessary, we work with the seller to agree an allocation of the available allowances between the parties and prepare an election to document the agreed disposal value.
  • Or we prepare a report detailing the seller’s entitlement to claim in order for it to satisfy the legislative requirements prior to completing the necessary election.
  • We carry out a cost segregation exercise following the transaction to identify the portion of the purchase price that relates to unrestricted PMAs.

Benefit to the Client:

  • Reassured: The full entitlement to capital allowances identified, secured and valued.
  • Protected: Removes the possibility of a post transaction dispute caused by misleading or incomplete information.
  • Improved cash flow: Higher post tax returns.

Why use the TFI Group?

+ Acquisition Of New Properties

Acquisition Of New Properties

The Issue: When buying direct from the developer the value of available allowances is determined through a cost segregation exercise to apportion the purchase price between the various asset categories. This apportionment relies on accurate estimates of fixed asset replacement costs as well as land values. Many businesses still don’t claim the relief or significantly under claim their entitlement due to misconceptions and the lack of specialist input.

How we Help:

  • We visit the property to record evidence of the plant and machinery fixtures.
  • We will contact the developer where possible to obtain design and original cost information to support the cost segregation exercise.
  • We value the land in accordance with Valuation Office Agency guidelines.
  • We calculate the apportioned value of PMA and SBAs and prepare a Statement of Qualifying Capital Expenditure.

Benefit to the Client:

  • Reassured: The full entitlement to capital allowances identified and valued.
  • Improved return on investment: Taxable profits sheltered or entitlement protected for future property owners.

Why use the TFI Group?

+ Capital Expenditure – Tax Relief On New Build And Fit Out

Capital Expenditure – Tax Relief On New Build And Fit Out Projects

The Issue: Capital expenditure incurred on building or refurbishing property or fitting out premises under a lease is likely to attract significant amounts of tax relief. Securing the available relief takes both a knowledge of the tax legislation, building design and technology, construction costs and HMRC practices.

How we Help:

  • We review the project details and confirm the different incentives that could apply.
  • We engage with the design team to fully understand the project.
  • We review all relevant technical, design and commercial data.
  • We prepare a cost segregation analysis to identify the qualifying project costs and to allocate them to the asset categories.
  • We ensure the claim is fully reconciled to supplier final accounts and the fixed asset additions in the statutory accounts for the relevant periods.

Benefit to the Client:

  • Reassured: A robust and fully substantiated claim capable of withstanding enquiry from HMRC.
  • Improved return on investment: Taxable profits sheltered or entitlement protected for future property owners.
  • Cash from losses: Tax credits available on expenditure incurred on land remediation.

Why use the TFI Group?

+ Demolition / Refurbishment Audits

Demolition / Refurbishment Audits

The Issue:  The demolition of assets upon which capital allowances have been claimed is a disposal event for the purposes of assessing any future balancing allowances or balancing charges. Failure to properly record demolished assets could expose the business to unwanted balancing charges on disposal. Furthermore, the demolition costs themselves will also attract capital allowances.

How we Help:

  • We isolate the plant and machinery demolition costs.
  • We schedule out assets removed as part of the demolition works.
  • We calculate the disposal values and ensure the necessary adjustments are made in the relevant pools.

Benefit to the Client:

  • Protected: Against any unexpected balancing charges.
  • Improved cash position: More tax relief identified and allowances retained in the pools to shelter future taxable profits.

Why use the TFI Group?

Corporate Services
+ Negotiation With HMRC

Negotiation With HMRC

The Issue:  A tax inspector typically has two years after the year end in which a claim has been made to raise an enquiry into a claim. This can come in the form of eligibility or entitlement challenges from the tax inspector or from the Valuation Office I District Valuer on costs and land values respectively. 

How we Help:

  • We enter into correspondence with HMRC authorities either direct or through your accountant as instructed.
  • We construct legal arguments as necessary with reference to case law, legislation and HMRC’s own guidance notes.
  • We support any costs with reference to source pricing documents, our own database of costs or from industry recognised pricing sources such as Spans.
  • We keep our clients advised throughout the process and make recommendations as necessary to ensure a speedy conclusion to the enquiry.

Benefit to the Client:

  • Protected: Against any unjustified reductions in claim values.
  • Improved cash position: Reduced tax relief leakage.

Why use the TFI Group?

+ Capital Allowances Pool Management

Capital Allowances Pool Management

The Issue: The Capital Allowances legislation stipulates that separate pools are maintained for different classes of asset. However, businesses still fail to properly maintain their pools meaning the full benefit of annual investment allowances are not fully utilised and identification of expenditure attributable to each individual property is not easily identifiable.   

How we Help:

  • We maintain all the different capital allowances pools and track expenditure going in and out each year.
  • We link qualifying expenditure across different pools by property.
  • We reconcile new additions against total capex records to identify any gaps.
  • We allocate the annual investment allowance in the most advantageous way.
  • We calculate any balancing allowances or balancing charges.
  • We provide the business’s accountant with an annual summary to feed into the tax return.

Benefit to the Client:

  • Reassured: That all potential allowances are claimed and details available on request.
  • Empowered: With information to make strategic decisions at the point of disposal.
  • Improved cash flow: Tax relief position optimised.

Why use the TFI Group?

+ Corporate Acquisition Due Diligence

Corporate Acquisition Due Diligence

The Issue: Corporate acquisitions often contain property, land or trading stock. The full amount of tax relief is rarely claimed meaning there is often scope to add value for the new shareholders post acquisition.   

How we Help:

  • We form part of the due diligence team to do a targeted piece of work looking specifically at the latent
    value of unclaimed tax incentives.
  • We review the capital allowances claims (and land remediation relief claims) made by the company.
  • We reconcile the claimed tax incentives against the property, development and land holdings.
  • We summarise the risks and opportunities relating to that part of the acquisition.
  • We provide estimates of the latent value inherent in the acquisition.

Benefit to the Client:

  • Reassured: You will know the detail of what you are buying.
  • Empowered: With information to negotiate a better deal.
  • Improved cash flow: Opportunities for tax rebates and tax planning opportunities realised.

Why use the TFI Group?

+ Portfolio Management For Non-tax Payers

Portfolio Management For Non-tax Payers

The Issue: New rules introduced in April 14 place an increasing burden on the buyer to confirm the capital allowances position prior to completing the deal. Non-taxpayers continue to underestimate their role in protecting the tax relief for future owners and are failing to promote the full benefits to potential buyers due to their own lack of knowledge and information.

How we Help:

  • We review the tax history of the properties held in the portfolio to ascertain what claims may be available to a purchaser.
  • We make enquiries with former owners where the information is incomplete.
  • We carry out a high level review of new development costs, refurbishments and contributions.
  • We make an assessment of the potential tax relief.
  • We prepare on an on line register with the relevant information on each property.
  • We prepare sales aids prior to disposal to highlight the available tax relief.

Benefit to the Client:

  • Good Governance: Best practice established and allowances preserved.
  • Reassured: You will know the detail of what you own.
  • Empowered: With information to negotiate a better deal on disposal.
  • No Delays: Risk of delay at sale due to incomplete capital allowances information mitigated.

Why use the TFI Group?

+ Training

Training

The Issue: Successful claims often rely on a small amount of participation from a large range of people. However, these people are rarely aligned, misconceptions and confusion abound and businesses rarely have the specialist knowledge to navigate their way through increasingly complex tax legislation.

How we Help:

  • We listen to understand what the key training requirements are.
  • We provide training for tax teams to help highlight the key tax planning opportunities.
  • We provide training for commercial and technical teams so they can procure in a more tax intelligent way.
  • We provide training for land buyers so they can ask the right questions.
  • We help bridge the gap between the various departments so everyone works towards a common goal.

Benefit to the Client:

  • Empowered: With the correct information to make better and more timely decisions.
  • Improved cash flow: Ability to secure the best outcome throughout the project life cycle.
  • Protected: Against the possibility of delay due to incomplete information.

Why use the TFI Group?