CAPITAL ALLOWANCES AND TAX RELIEFS WITHIN PROPERTY EXPENDITURE
Davis Langdon Banking Tax & Finance are the UK’s foremost property tax consultancy. We maximise tax relief within property investments including both property purchases and development or refurbishment expenditure.
The range of claimable tax allowances within property has become complicated over time and maximising the tax benefits of any project covers an understanding of the technical issues in all aspects of property cost and development expenditure as well as the case law and legislation for each. The main allowances and tax reliefs include:
Qualifying land remediation on contaminated sites and within existing buildings which attracts a 150% claimable relief. What is required is an understanding of the scope of any potential claim where there are specific foundation requirements, for example, caused by ground contamination, and what consequential costs may be applicable. Remediation of asbestos within buildings is also included. Under the polluter pays principle you must not be the polluter of have any direct connection with them.
Integral plant and machinery attracting a reducing balance writing down rate of 10% per annum. This category includes basic mechanical, electrical and lift and escalator installations, Being fairly low value can be improved by ensuring that appropriate items are properly categorised to main pool plant below or converted to energy and water saving plant to qualify for Enhanced Capital Allowances (below).
Main pool plant and machinery attracting a reducing balance writing down rate of 20% per annum. This category includes all qualifying plant and machinery installations outside of the definition of integral plant and can comprise sanitary and welfare installations, fire alarm systems, security, furniture and fittings and carpets.
Enhanced capital allowances for energy and water saving plant attracting a first year allowance of 100%. Modern buildings can be specified to include many items that can qualify for these valuable allowances, but they require precise specification and an understanding of how to interrogate such items as packaged air handling units and refrigeration plant. It is not enough to have an item of plant that is energy or water efficient to qualify, you must purchase a specific qualifying listed item. These allowances can only be claimed on new or unused plant.
It is also useful to be aware of the Annual Investment Allowance, which allows you to claim a 100% first year allowance for the first 50,000 of expenditure on plant and machinery on an annual basis. The correct use of this allowance can maximise the cash flow of the tax benefits from capital allowances.
Other allowances include hotel allowance and industrial building allowances which will be phased out by April 2011 and research and development allowances for which you must be undertaking this type of activity within the building as an owner user.
Included are some case studies around typical investments, but for further information please visit our website at www.dlcrosherjames.com. |
