The taxman has successfully blocked attempts of pubs group J D Wetherspoon to clean up on capital allowances for toilets in its pubs.
Wetherspoon claimed a capital allowance offset against the cost of modernising two of its pubs and found HM Customs and Excise took a dim view about the inclusion of partition dividers in its toilets.
While everyone accepted that customers valued their privacy, HMRC argued there was no reason why the taxpayer should contribute to the construction of partitions.
Tax experts sitting on the First Tier Tribunal ruled initially that while partitions made from wood or flimsier material did qualify, those made of bricks or blocks did not as they formed part of the fabric of the building.
Wetherspoon felt HMRC was nit–picking and appealed and the special commissioners agreed. A determined HMRC then went on the offensive and lodged its own appeal.
The Upper Tribunal has just backed the HMRC’s appeal and went further by stating it thought it odd that HMRC had only appealed the claim for block work partitions. It said it would have supported HMRC if it had appealed on the non–block partitions as well.

Around nine in 10 commercial properties – from the smallest chippy to the biggest office block – are sitting on unused capital allowances tax relief.

And because this tax relief can be backdated until the year the property was purchased, there are billions of pounds of tax rebate languishing in commercial property stock.

So what are capital allowances?

They’re a form of tax relief available to anyone incurring capital expenditure buying, building or making adjustments to commercial property.

Examples of properties on which capital allowances can be claimed include factories and industrial units, leisure facilities, warehouses and depots, haulage yards, offices, retail stores, care homes and hotels.

So why is so little known about capital allowances?

First, HM Revenue and Customs, understandably, isn’t keen to sing this opportunity from the rooftops.
Secondly, identifying capital allowances within commercial properties is complex, so much so that even accountants only scratch the surface.

While accountants will claim on more obvious items such as shutters and curtains, fire extinguishers and carpets, generally they will not drill down to the items where the far more significant costs to a business lie.
These might include air conditioning or heating systems, lighting and security systems, plant and machinery items.

A specialist capital allowances firm, by contrast, will have a different skill set and a more detailed understanding of capital allowances law and practice than most accountants, and be able to uncover more valuable capital allowances. If you think this applies to you contact Exact Business Taxation Services, specialists in Capital Allowances to see if we can help you identify more items to claim on 0845 467 2765 or email our friendly team at support@exactbusiness.co.uk

Capital Allowances can be claimed on the following areas of investment:-
• Initial purchase of property (as there are inherent plant & machinery within the building)
• Refurbishment & development of premises (for the plant & machinery incurred)
• Conversion of flats above shops – using Flat Conversion Allowances
• Bringing back into use a derelict building. You can claim this under the BPRA rules.
• Cleaning up contaminated land or buildings. Treating Asbestos / oil / poisons gets you tax relief.
and a whole host of other allowances.

Within the initial investment, purchase of the property, we have to undertake a premises survey ot identifiy all of the plant & machinery. We have to check that none of the prior owners have claimed the allowances (less than 4% have). If they havent, you are free to claim all of them.

call us now on 0845 467 2765 or email us on support@exactbusiness.co.uk

Organisations keen to get their money’s worth are turning to capital allowance experts to ensure the best return.

A capital allowance is a deduction on a company’s Corporation Tax for the depreciation of an asset. When a company purchases a large asset, such as an expensive piece of machinery or a building, they may be entitled to claim tax relief for the depreciation in its cost. Capital allowances can be taken when the business is owned by a sole trader, partnership or a corporation. This allowance against the cost of the asset can be offset against general income or profits, thereby reducing the owner or company’s overall tax burden.

While the tax treatment of assets may not be the defining factor in the purchase of key equipment, it does function as part of the decision-making process.

Because the rules regarding capital asset tax allowances do tend to alter from year-to-year and also vary, depending on the asset and type of company, independent capital allowance firms have sprung up in the UK and elsewhere to advise companies on what they can and cannot claim allowances on. These firms are also able to advise companies regarding the acquisition of new capital assets and whether purchasing or leasing is the best option. One such expert firm is Exact Business Taxation Services, Cambridge.

Because the tax system is so complex and constantly changing, many companies are now looking for expert guidance and this is what initially created the need for independent capital allowance firms. If you are in any way unsure if you are entitled to claim these Capital Allowances call us at Exact Business Taxation Services on 0845 467 2765 – we are here to help.

When capital allowances were first introduced it was seen as a great financial help and incentive to businesses looking to invest in their future or starting out, the idea was to encourage would be entrepreneurs and stimulate growth. However, a recent study has shown that not all businesses and would be entrepreneurs are aware of what is available to them or how capital allowances have changed since they were first introduced. Hopefully this will cover give a good overview of what capital allowances are but it is always a good idea to consider the advice and guidance of an expert in tax relief and capital allowances as they are fairly complex.

What are Capital Allowances and How Can I Claim

Capital allowances are a tax relief that a business can claim on money spent on fixed assets. A tax allowance of this type can be applied to the costs of buildings (any changes to make the building more suitable for a businesses requirements and needs) and various types of machinery works (machinery that helps a business run, and looking at enhanced capital allowances even those that offer environmentally efficient alternatives).
Although the tax relief has been around in its current form for a while there are changes scheduled for April 2012 by the current government that will mean a business which would currently be able to write off the cost of investment against taxable profit of up to £100,000.00 will see this reduced to £25,000.00.00 – a significant drop. So now is a critical time to get guidance and information on how your business could benefit.
Its not too late if you claim before April 2012 based on the old rate a 100% first year allowance will enable your business to write off the cost of investments against taxable profits of up to £100,000.00 however if you wait and don’t look into it until after April 2012 this figure is greatly reduced to £25,000.00, this means if your business has made recent changes in the first year you should look at claiming these or seek advice on whether the assets you have invested in could be eligible for tax relief.
Tax relief is specialist area of tax advice, and not always obtainable from a tax advisor – when finding out further information always check with the advisor that they are experienced in this area of tax or look for a specialist capital allowances advisor. They should be able to provide you with the information and guidance needed to successfully claim any tax relief available on recent expenditure or advice on future spending. It may also be worth looking at how your company could benefit from enhanced capital allowances which is an energy efficient based tax relief on purchased assets.

What Are Capital Allowances?

When you spend money buying or improving a property, HMRC allows you to offset some of that expenditure against your profits, or general income for tax purposes.

It’s your statutory right to claim

By allowing a retrospective or current acquisition claim based on the purchase price. It is not a contentious tax avoidance scheme or loophole but is based on established UK statutory law dating back to 1878.

Will I qualify?

To claim capital allowances you (or your company) must satisfy the following criteria:

• You are a UK taxpayer (Income Tax or Corporation Tax)
• You own a UK commercial property
• OR you own a furnished holiday property either in the UK or within the EEA with a minimum purchase price of £300,000 (collectively)
• The property is not held fully within a pension fund, charity, government owned or traded as stock

Best of All……

Capital Allowances can be offset against any income that they derive from.

If a company owns the asset, you can use the allowances against that company’s taxable profits and then against any other company within the same tax group, if a loss is created.

Claims can be retrospective as there is no time limit on how far you can go back, in owning the property and you can even go back two tax years for a tax refund!

What Capital Allowances Can Be Claimed

It is routine for accountants to claim capital allowances for “movable” fixtures and fittings in a shop, for plant and machinery in a factory, or for furniture in a furnished holiday let. They cannot claim such allowances for the “immovable” fabric of the building, however, which is viewed as a non-depreciating asset.

The opportunity we are concerned with is the class of assets in the grey area between “movable” and “immovable”. Clearly office furniture is movable and the roof is immovable. But what about air-conditioning plant, emergency lighting and alarm systems? These are normally considered by accountants as “freehold improvements” and not therefore eligible for capital allowances.

Even when businesses or individuals hear about our service, there is a common misconception that, because the expenditure occurred in the past, they have missed the boat. Not so! Indeed there is no time restriction on when you can claim these allowances.

For more information and advice contact me, Arthur Kemp, or one of my friendly team on 0845 467 2765 or email support@exactbusiness.co.uk

Private investors seeking to back new business ventures, but with more tax relief than venture capital schemes can offer, are being given the opportunity to fund the renovation of old commercial properties and potentially triple their money. However, tax advisers warn that these specialist investments are unregulated – and subject to bank financing, valuation and economic risks.

Some advice firms, like us at Exact Business Taxation Services, are offering wealthy clients the chance to commit lump sums to property projects utilising Business Premises Renovation Allowances (BPRA).

BPRA deals enable investors to make use of 100 per cent capital allowances for “qualifying renovation expenditure” on derelict commercial properties, in designated “assisted areas” around the UK. These areas include Cornwall, Wales, and the Shetland and Orkney Islands – but also parts of big cities such as Birmingham, Glasgow, Liverpool and Newcastle. BPRA was established as a statutory tax incentive in 2007 to encourage the regeneration of business locations, and has been extended to 2017.

But they typically make their investment through a limited liability partnership, which arranges bank funding on a “limited recourse” basis – where the debt is only repayable from specific assets and cash flows – to cover around 60 per cent of the purchase price, including the renovation work. That leaves the investors to find 40 per cent of the total.

After renovation, they must make the property available for rental for at least seven years (typically eight years from investment) and the initial tax relief may be withdrawn if the property is disposed of within the seven-year period.

At the end of that time, though, the property may be sold. On disposal, the outstanding part of the bank loan is recovered from the sale proceeds, with any surplus available to the investors. Returns will therefore depend on the saleability of the property, and the taxable rental income generated. If the gross sales price is less than the original gross cost of the property, the returns will be tax-free.

These rules can make BPRA a tax-efficient way for wealthy clients to gain exposure to higher-risk commercial property.

A typical illustration, a gross investment of £100,000 is made using a £60,000 non-recourse bank loan, with the remaining £40,000 from an investor. Around 20-30 per cent of the total cost will not qualify for capital allowances, but at least £70,000 will – giving a 50 per cent taxpayer an allowance of £35,000 to set against income in the year of investment. Net of this tax relief, the £40,000 investment costs £5,000. Over the next seven years, the investor has to pay tax on rental income, giving a tax bill of £15,000.

However, even if the property is only sold for £80,000 and there is still £20,000 of the bank loan outstanding, that delivers a return of £60,000 on the investor’s net outlay of £20,000.

In this way, BPRA schemes differ greatly from more mainstream asset-backed venture capital trusts (VCTs) and enterprise investment schemes (EISs). VCTs give upfront tax relief at 30 per cent on investments into quoted or unquoted companies that carry out qualifying trading activities, and may or may not own their premises. EISs give tax relief at 40 per cent for investments in early-stage growth companies.

Some BPRA schemes can deliver tax refunds in excess of the initial cash investment, while having a similar risk profile to VCTs and EIS’s

However, some schemes require intensive due diligence. Investors need to be sure of a range of factors: the existence of a genuine third-party lending bank, the use of independently verified valuations, and the absence of any financial relationship between promoters, developers, contractors or tenants.

Investors have to do their homework on the scheme participants, and the tax rules. Promoters must be able to prove they have a facility letter from “a recognised credible banking institution”, consents and building contracts, and independent feasibility reports. Overall, investors should approach with caution a product where you think HM Revenue & Customs will be scrutinising very closely all the items that are covered in the developer agreement, and that drive the level of tax relief for investors.

Lloyds TSB won a tax tribunal case this month that could be worth £50 million and have ramifications for other major banks in terms of their leasing arrangements, CFO World can reveal.

The case, heard in September last year, concerned capital allowances on two ship bought by Lloyds TSB Equipment Leasing company in September 2002 for around £200 million.

Tax rules governing these transactions allowed Lloyds to claim around 25 percent capital allowances on the initial amount.

lBut in this case HM Revenue & Customs refused its claim arguing that because Lloyds leased the ships to an overseas company, outside of UK jurisdiction, the capital allowances were not applicable.

Lloyds argued that the capital allowances legislation contained a set of “protected leasing rules” however, which meant that arrangements relating specifically to ships, aircraft and transport containers qualified for capital allowances.

The judges found in favour of Lloyds.

Stephen Herring, tax partner at BDO, said that the judges made the right decision. “This wasn’t some big tax scam. If £200 million is spent on a ship, someone is entitled to the allowance on this. The leasing company reflected the capital allowance savings in the cost of the leasing,” he said.

John Whiting, tax director at the Chartered Institute of Taxation, said Lloyds’s case “clearly had a lot of similarities to the Barclays Mercantile case”, which ended up in the Supreme Court, where judges found unanimously in favour of Barclays.

“It could be seen as another attempt by HMRC to curtail capital allowances for banks that enter into what seems to HMRC as arrangements that are driven by those capital allowances,” Whiting said.

“From the bank’s point of view these arrangements are primarily a way of arranging financing for a commercial arrangement,” he added.

There was a tax motive to the transaction, Whiting said, with arrangements put in place to make sure that the capital allowances ended up “in the right place”.

However, he said: “This is overall a commercial arrangement and if there is a tax ‘twist’, it’s the commercial side that is paramount”, which ultimately decided the appeal.

A Lloyds spokesperson said: “Lloyds Banking Group seeks to resolve technical disputes with HMRC without having to resort to tribunals or courts, although there are rare occasions when this is not possible.”

A spokesman for HMRC said:”HMRC is considering this decision carefully before deciding whether or not to appeal further.”

From April this year the rules governing these transactions will change to permit companies to claim 18 percent, rather than 25 percent.

If you think you have any ‘plant and machinery’ that you have not claimed on or think you may be entitled to Capital Allowances, contact me, Arthur Kemp on 0845 467 2765 or email support@exactbusiness.co.uk

HMRC has pushed back the deadline for completing your online tax returns to midnight on 2 February, following strike action on the original 31 January deadline.

Returns submitted by 2 February will be treated as though they were submitted on 31 January, though if this will only be applicable for those who have applied and received their activation codes to complete their online tax returns.

Last year, HMRC fined 1.5 million people for missing the tax return deadline – an 8% increase on 2009-10. The date for paper tax returns is 31 October, but those who make an online tax return get an extra three months, with a deadline of 2 February.

Self Assessment taxpayers will face penalties if they miss the above deadline.

Over 10 million people completed a self-assessment tax return in 2010-11. Typical self-assessment taxpayers include the self-employed, those with an annual income above £100,000 or investment income of over £10,000.

If you are aged over 65 and get age-related allowance you may also have to complete a self-assessment tax return. The full paper version is six pages long, but there is a shorter version for pensioners and the self-employed with a turnover of under £30,000.

The easiest method of completing your self assessment tax return is on-line. Completing an online tax return offers several advantages over the traditional paper form. One major advantage is that it gives you an extra 3 months to complete your tax return. In 2010-11 77% made their tax return this way, compared to 23% in 2005-6.

For more information or advise please email support@exactbusiness.co.uk or call us at Exact Business Taxation Services on 0845 467 2765

With Capital Allowances set to change dramatically from April, rural businesses should consider bringing forward their investment. In recent years tax relief on the purchase of plant and machinery has been relatively generous – but that is about to change.

Currently, most businesses can write off up to £100,000 of qualifying plant and equipment expenditure against profits each year, using the Annual Investment Allowance (AIA). But from April the allowance will be slashed to just £25,000, with any expenditure above that threshold receiving annual relief of just 18%, compared to 20% at present.

Inevitably, this will lead to higher tax bills for businesses. For example, a farming partnership with annual profits of £100,000, investing £40,000 on average in equipment each year, could see its tax bills rise by £4,500 a year.

Those with account year-ends other than 31 March / 5 April need to be particularly careful because of hybrid allowances that will be in place during 2012. Most equipment will need to be bought before the end of March to get full relief, adding an extra degree of complication.

If you are unsure on how this affects you contact me, Arthur Kemp or one of my friendly team at Exact Business Taxation Services on 0845 267 2765 or email support@exactbusiness.co.uk