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When acquiring or leasing new business premises, there is a potential opportunity to secure additional tax deductions through capital allowances (CAs). This involves identifying qualifying plant and machinery (P&M) assets attached to or integrated into the building. Despite the tightening of CA rules in 2012 and 2014, tax savings are still to be made.
Capital Allowance Opportunities
There are two common scenarios where CA claims may arise:
- Businesses have occupied the same premises since April 2012, particularly before April 2008.
- Businesses are relocating to a new property or acquiring an additional one.
Identifying Qualifying Assets CAs can be claimed for various equipment used in a business. When purchasing a property, it is essential to conduct a comprehensive examination of the building inside and out to identify assets that the seller cannot remove as they are part of the structure. Such assets include mechanical hoists, air conditioning systems, and other integral features. Unfortunately, it is common for sellers to overlook potential CA claims. According to the 2014 rules, qualifying assets must be identified before completing the purchase of a property. In addition, discuss any unclaimed items with the seller to avoid inadvertently transferring potential tax savings to the current property owner.
Safeguarding Potential Tax Savings To prevent the seller from claiming CAs for overlooked items and benefiting from the tax savings, follow these steps:
- Request the seller to provide a list of P&M assets included in their CA records early in the purchase process.
- Compare the provided list with your own to identify additional qualifying items which can be used as a bargaining chip during negotiations.
- Offer to share your list of additional items, provided the seller agrees to split the tax savings from the extra CAs or reduce the property’s purchase price.
If the seller occupied the property before April 2008, inquire about any integral features installed in the building before that date. Due to a peculiarity in the rules, they are not eligible to claim CAs for these items, but as the new owner, you are. Maximizing tax relief through capital allowances is a valuable strategy when acquiring new business premises. Identify qualifying assets and negotiate with the seller to secure the best tax savings. Seeking Expert Advice Identifying which items qualify for CAs can be time-consuming and complicated without a thorough understanding of tax rules. As this is a specialized area, we recommend consulting our tax experts for assistance. Contact our specialist tax accountants and tax advisors for help and a quick quote. If you need help to plan your taxes, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.