Commercial Buildings Owners - The Clock is ticking to claim Capital Allowances on embedded equipment

Capital Allowances Countdown - be aware of the possible impact on you if you own a commercial building.

Far reaching changes to Capital allowances come into force on 1st April 2014 that may have a significant effect on the allowances that can be claimed in respect of commercial buildings.

Who do the changes affect?

The description “commercial buildings” may bring to mind manufacturing companies operating out of factory premises but in reality it can affect businesses such as care homes, hotels, guest houses, doctors, dentists, solicitors etc just as much. Essentially, any business that may have a commercial building upon which capital allowances may be available.

Why are capital allowances important?

Capital allowances are a form of tax relief and are available in respect of business assets. They can be offset against taxable profits in the year and reduce tax liabilities. They can save money. Any changes to the rules therefore can have a significant financial effect on the businesses that have them available to be claimed.

Capital allowances can be claimed on various assets that are integral to a building. When it is sold the purchaser may want to claim them and, as the amount could be substantial, the determination of the value of such assets in the purchase price may be an important consideration.


What is changing?

 1) Commercial property purchases made between 1st April 2012 and 31st March 2014

The changes mean that if the purchaser of a commercial property wants to claim capital allowances they must enter into a joint election (within 2 years of the purchase) with the seller. As the changes were introduced by HM Revenue & Customs in April 2012, the first raft of commercial property sales, upon which the 2 year time period will expire, will happen at the end of March 2014.

NB If you have bought a commercial property after April 2012 and do not yet have the joint election in place, now is the time to arrange one.


2) Commercial property purchases after April 2014

From April 2014, the purchaser of the property can’t claim capital allowances unless the seller has previously made a claim.

If there are allowances available that the seller hasn’t claimed, perhaps because they were unaware that they had certain assets upon which they could do so, the purchaser cannot claim them and the possibility is lost.

This also affects the seller of the property as the possibility of claiming valuable capital allowances can affect the sale price.

If you hold commercial property you should ensure that all capital allowances available have been identified and that you maintain a detailed capital asset and allowances history. You may see the benefit of this when you sell the property.

If you are purchasing commercial property you should ensure that your legal advisor requests the asset and allowances history referred to above early in the work on the transaction and before the contract is signed.



Important - Your action checklist


1) If you have purchased commercial property between April 2012 and March 2014, do you have a joint election in place with the seller of the property? If not, one should be arranged as soon as possible and certainly within 2 years of the date of the transaction.


2) If you hold commercial property, are you happy that all assets upon which capital allowances are available have been identified? It may be valuable to use the services of a capital allowance specialist to perform a review of your premises. These companies typically work on a no fee basis unless any tax savings are identified. Time is running out for such a review and this should be looked into as a priority.


3) If you hold commercial property, do you have a detailed history of capital assets and allowances? If not, you should arrange for one to be prepared. It may save time when the property is sold and help you to secure a higher sale price.


4) If you are purchasing or intend to purchase a commercial property in the future, ensure that you review its capital allowances position and ensure that your legal representatives do at an early stage of the work on any such transaction. One of the points you need to make sure your solicitor covers with a vendor, is that the agreement requires the vendor to claim capital allowances if a claim has not yet been made previously.


5) Make an appointment with OBC The Accountants to discuss your capital allowances position. Call us now 01323-720555 before it is too late.


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