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Law for Business

Knowhow - guidance - precedents

12 NOV 2012

Looking for buried tax treasure

Could your business be missing out on capital allowance?

Family owned businesses are more likely to have invested in property assets than their non-family owned counterparts. Often, property has been in the family business for generations and little thought is given to it as an asset.

All new and existing business property owners have the opportunity to claim capital allowances on commercial property. Recent changes to the rules relating to capital allowances could reduce your overall tax bill and improve your cash flow.

When a commercial property is purchased a certain amount of the price goes to pay for fixtures and fittings which can attract capital allowances. Different rules apply to Integral Features (such as lifts and electrical systems) and Plant and Machinery (such as fire alarms and burglar systems). The different rules affect only the period over which relief is given not the overall quantum of the relief.

The value of Plant and Machinery included in the purchase price and eligible for capital allowances will depend upon the age and type of building and on whether claims have been made by previous owners. Experience indicates that up to 20 to 25% of the value of a commercial property could often reasonably be allocated to items qualifying for capital allowances. Any family business owning a commercial property that has yet to make a claim should consider doing so.

A claim can be made at any time by adding the cost of the plant to the capital allowance pool and claiming writing down allowances from the year of the claim. The value of the plant and machinery that can be claimed is either the actual cost (where for instance a lift has been added to the building) or a proportion of the original cost of the building to take account of the plant included in the purchase price. In the latter case it may be necessary to instruct a professional valuer to establish a reasonable proportion.

A commercial property with inherent capital allowances for claiming could be an ideal investment for a purchaser. If you are selling a property you may wish to check that the property and fixtures and fittings you already have are being correctly valued.

If you are currently looking to acquire a commercial property, additional steps now have to be included as part of the sale and purchase agreements in order to preserve the right to make a claim for capital allowances. It is necessary to sign a joint election with the seller as to the value of plant and machinery included in the purchase price. If agreement cannot be reached, an application can be made to the First Tier Tribunal to determine the value. In either case the deadline for making the election or the application is 2-years from acquiring the property. However, going to tribunal or negotiating once the purchase has completed could be costly.

We are happy to discuss possible claims with you or guide you through a sale or purchase.

For further information, please contact Emma Bradley a tax specialist and Senior Associate in Veale Wasbrough Vizards' Family Business team on 0117 314 5445 or at ebradley@vwv.co.uk.

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