Residential Investor

Lifecycle

Whether investing in a purpose built Private Rental Scheme, student accommodation or second hand properties including two or more private apartments there is scope for claiming capital allowances on the common facilities that serve the individual apartments.  For some higher end schemes this is likely to include bar and gym areas, swimming pools and reception areas together with any common plant serving the whole building.

Outlined below are the issues that need to be considered at each stage of the investment lifecycle to make sure the benefits from all available tax relief is fully realised.

BUY

+ 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.  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 result in no claim for the purchaser. Non-tax payers also need to be aware that they can preserve the allowances for future owners.

How we Help:

  • We confirm the entitlement to claim capital allowances.
  • We liaise with your legal team to make sure the pre-contract enquiries ask the right questions.
  • We advise what clauses need to be incorporated into the sale agreement to protect your interests.
  • We confirm the scope and estimated value of your capital allowances claim.

Benefit to the Client:

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

Why use TFI Group?

+ Pre-Acquisition Advice: New Properties

Pre-Acquisition Advice: New 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 ideally required from the developer to support your claim.
  • We confirm the scope and estimated value of your capital allowances claim.

Benefit to the Client:

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

Why use TFI Group?

+ Entitlement Reports

Entitlement Reports

The Issue: On more development complex projects or transactions involving multi-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:

  • 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 TFI Group?

+ 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, they must first confirm whether any previous claims have been made by any previous owner since 24th July 1996 that could restrict their ability to claim.

How we Help:

  • We review the capital allowances claim history.
  • 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 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, get a tribunal to determine 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 and purchase 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.
  • We work with the seller as necessary to determine an appropriate disposal value.
  • If necessary, we prepare an enquiry for a Tribunal determination of the disposal value.
  • We prepare an election to document the agreed PMA 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 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, 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 taxpaying 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 allowances for future owners.

How we Help:

  • We review the terms of the sale and purchase agreement and answers to the CPSE section 32 enquiries.
  • 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 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, valued and secured.
  • Protected: Removes the possibility of a post transaction dispute caused by misleading or incomplete information.

Why use TFI Group?

+ Preparing Claims: New Properties

Preparing Claims: 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 TFI Group?

DEVELOP

+ Entitlement Reports

Entitlement Reports

The Issue: On more complex projects involving multi-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 and confirm where entitlement sits.
  • We provide an estimated value of the relief.

Benefit to the Client:

  • Reassured: Allows you to confidently factor the benefit of the incentives into the investment decision.
  • Protected: Allows corrective action to be taken if entitlement threatened.

Why use TFI Group?

+ Tax Intelligent Procurement

Tax Intelligent Procurement

The Issue: Often claims are made after the expenditure is incurred meaning any opportunities for designing and procuring in a more tax efficient way are lost resulting in compromised claims. This is particularly relevant for projects that involve high levels of mechanical and electrical installations and expenditure on facilities provided for the tenants.

How we Help:

  • We guide the design team through the eligibility criteria to claim the various types of allowances.
  • We review the project with the design team to highlight the areas where allowances can be enhanced.
  • We advise the design team on specification, design and contractor procurement matters to ensure 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 thereby making the claims more robust in the event of an enquiry from HMRC.
  • Improved cash flow: A project that realises the full tax relief potential.

Why use TFI Group?

+ Preparing Claims: New Build & Fit Out

Preparing Claims: New Build & Fit Out 

The Issue: Capital expenditure incurred on building or refurbishing property or fitting out premises 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. Tax credits are also available on qualifying environmental plant and machinery expenditure incurred before April 2020.

Why use TFI Group?

REFURBISH

+ Tax Intelligent Procurement

Tax Intelligent Procurement

The Issue: Often claims are made after the expenditure is incurred meaning any opportunities for designing and procuring in a more tax efficient way are lost resulting in compromised claims. This is particularly relevant for projects that involve high levels of mechanical and electrical installations and expenditure on facilities provided for the tenants.

How we Help:

  • We guide the design team through the eligibility criteria to claim the various types of allowances.
  • We review the project with the design team to highlight the areas where allowances can be enhanced.
  • We advise the design team on specification, design and contractor procurement matters to ensure 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 thereby making the claims more robust in the event of an enquiry from HMRC.
  • Improved cash flow: A project that realises the full tax relief potential.

Why use TFI Group?

+ Preparing Claims: Refurbishment & Fit Out

Preparing Claims: Refurbishment & Fit Out

The Issue: Capital expenditure incurred on building or refurbishing property or fitting out premises 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. Tax credits are also available on qualifying environmental plant and machinery expenditure incurred before April 2020.

Why use 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 unwanted balancing charges.
  • Improved cash position: More tax relief identified and retained in the pools to shelter future taxable profits.

Why use TFI Group?

REDEVELOP

+ Tax Intelligent Procurement

Tax Intelligent Procurement

The Issue: Often claims are made after the expenditure is incurred meaning any opportunities for designing and procuring in a more tax efficient way are lost resulting in compromised claims. This is particularly relevant for projects that involve high levels of mechanical and electrical installations and expenditure on facilities provided for the tenants.

How we Help:

  • We guide the design team through the eligibility criteria to claim the various types of allowances.
  • We review the project with the design team to highlight the areas where allowances can be enhanced.
  • We advise the design team on specification, design and contractor procurement matters to ensure 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 thereby making the claims more robust in the event of an enquiry from HMRC.
  • Improved cash flow: A project that realises the full tax relief potential.

Why use TFI Group?

+ Preparing Claims: New Build & Fit Out

Preparing Claims: New Build & Fit Out

The Issue: Capital expenditure incurred on building or refurbishing property or fitting out premises 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. Tax credits are also available on qualifying environmental plant and machinery expenditure incurred before April 2020.

Why use 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 unwanted balancing charges.
  • Improved cash position: More tax relief identified and retained in the pools to shelter future taxable profits.

Why use TFI Group?

SELL

+ Pre-disposal Advice: Second Hand Properties

Pre-disposal Advice: Second Hand Properties

The Issue: A seller who had entitlement to claim capital allowances must account for a plant and machinery disposal value when the building is sold irrespective of whether they have claimed any allowances. Failure to secure an agreed value with the buyer can leave the seller exposed to suffering a full disposal value and having to suffer 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 declare its disposal value.
  • We prepare answers to CPSE section 32 enquiries.
  • We prepare all required written notices where the seller is not entitled to claim allowances.

Benefit to the Client:

  • Added Value: Increased value and attractiveness of the investment.
  • Reassured: Removes the possibility of delay in the sale resulting from incomplete capital allowances information.
  • Empowered: A stronger negotiating position.

Why use TFI Group?

+ Sales Aids

Sales Aids

The Issue: Availability of capital allowances can significantly improve the attractiveness of a commercial investment but sellers still fail to fully promote the tax benefits to potential purchasers especially in instances where the seller has no interest in the tax relief themselves, such as  housebuilders, developers or non-tax payers.

How we Help:

  • We provide sellers with an estimate of the capital allowances applying to each building.
  • We provide the net present value cash benefit likely to be derived by the buyer.
  • We provide a capital allowances Sales Aid to be included in the marketing material.

Benefit to the Client:

  • Marketability: Increased value and attractiveness of the investment.
  • Protected: Removes the possibility of delay in the sale resulting from incomplete allowances information.
  • Empowered: A stronger negotiating position.

Why use TFI Group?

CORPORATE SERVICES

+ 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 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 TFI Group?

+ 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 / 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 Spons.
  • 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 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 TFI Group?

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