Businesses in the South West are missing out on 270 million worth of capital allowances, according to new research.

Thousands of the region’s companies have not claimed huge entitlements for heating, lighting systems and air conditioning fixtures within their buildings, a UK capital allowances specialist has said.

An estimated 7,480 firms in the Westcountry are still eligible for the tax rebate under Government rules for businesses owning commercial property. Some 148 million has not been claimed by Devon businesses, and 92 million has not been claimed in Cornwall.

The research found most large corporations had taken full advantage of the system of capital allowances, but many small and medium-sized enterprises were failing to lodge a comprehensive claim.

Around 2,000 businesses who submitted a claim to HMRC in 2012 could have received an average tax relief payout totalling more than 36,000, it found. Mathew Scott, director of KPMG in the South West, said there was a “lack of awareness” about what expenditure qualifies for capital allowances and at what rates.

He said: “Businesses often don’t claim because they are not aware they can. There are opportunities to claim more allowances particularly in relation to fixtures in properties but also claiming enhanced rates of relief on water/energy efficient plant.”

He warned: “For commercial property purchases after April 2014, if the vendor has not claimed capital allowances on the property’s fixtures then the purchaser may not be able to claim either. At this stage it is not clear if this will impact on the property value.”

Andy Richens, director of technical taxation development at Bishop Fleming accountants in Exeter, said: “The changes in the 2012 Finance Act means that there does remain an opportunity to claim allowances, but it must take into account the capital allowance claims already made by the vendor of the building. Too often, this fact is overlooked.”

Shaun Murphy, managing director of Portal Tax Claims, which carried out the research, said: “Businesses in the South West are missing a trick as far as capital allowances are concerned, often assuming that their accountant has the matter in hand. A second common misconception is that capital allowances only apply to items such as computers and vehicles.”

Mr Murphy added: “Our research highlights how businesses in the South West are missing out on millions in unclaimed tax breaks. At a time of economic hardship, a tax payout on this scale would make a major difference fuelling expansion programmes, driving economic growth and ultimately helping Britain get back on its feet.”

Some 90% of commercial buildings in the South West are eligible for a rebate, it is thought.

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Businesses in Fenland are in line for a tax break windfall worth in the region of £14 million according to new

research by Portal Tax Claims, the UK?s leading capital allowances specialist.

An estimated 380 firms in Fenland are still eligible for the tax rebate under Government rules for businesses

owning commercial property.

Most large corporations have taken full advantage of the system of capital allowances, according to Portal Tax

Claims, but many small and medium-sized enterprises are failing to lodge a comprehensive claim. Portal Tax

Claims calculate that the total value of the tax relief through these unclaimed allowances has now reached £8.8

billion nationally.

Shaun Murphy, Managing Director of Portal Tax Claims, comments: “Businesses in Fenland are missing a trick

as far as capital allowances are concerned, often assuming that their accountant has the matter in hand. A

second common misconception is that capital allowances only apply to items such as computers and vehicles.

Our research shows that many firms are failing to take their business premises into account and that each

property potentially contains thousands of claimable items. Submitting a rebate can be daunting for the

uninitiated but the financial rewards can be significant.”

Portal Tax Claims’ research suggests that around 2,000 businesses who submitted this type of capital allowances

claim to HMRC in 2012 would have received an average tax relief “pay-out” in excess of £36,000. Allowances

can often be found up to a value of 40 per cent of a property’s purchase price and it is thought that some 90 per

cent of commercial buildings in Fenland are eligible for a rebate.

Shaun said: “Our research highlights how businesses in Fenland are missing out on millions in unclaimed tax

breaks. At a time of economic hardship, a tax-payout on this scale would make a major difference – fuelling

expansion programmes, driving economic growth and ultimately helping Britain get back on its feet. Portal Tax

Claims urges the Fenland business community to act now or risk missing out.”

Andrew Shepherd from Portal Tax Claims discusses how a £8.8 billion tax rebate is sitting in the taxman’s bank account

HAMPSHIRE businesses could be owed £225m in tax break windfalls, a tax expert has claimed.

Portal Tax Claims, which specialises in capital allowances, estimates more than 6,000 small or mediumsized
companies are eligible for a tax rebate under government rules for businesses owning commercial property.

Up to 90 per cent of the county’s commercial buildings could qualify for tax breaks.

Managing director Shaun Murphy said: “Businesses in Hampshire are missing a trick as far as capital allowances
are concerned.

“Our research shows that many firms are failing to take their business premises into account and that each
property potentially contains thousands of claimable items.”

Businesses in Cambridge are in line for a tax break windfall worth in the region of £18m, according to new research by Portal Tax Claims.

An estimated 500 firms in Cambridge are still eligible for the tax rebate under government rules for businesses owning commercial property.

Most large corporations have taken full advantage of the system of capital allowances, says Portal, but many small and medium-sized businesses are failing to lodge a comprehensive claim.

Portal reckons the total value of the tax relief through these unclaimed allowances has now reached £8.8bn nationally.

Shaun Murphy, Portal MD, said: “Businesses are missing a trick as far as capital allowances are concerned, often assuming that their accountant has the matter in hand.

“A second common misconception is that capital allowances only apply to items such as computers and vehicles.

“Our research shows that many firms are failing to take their business premises into account and that each property potentially contains thousands of claimable items.

“Submitting a rebate can be daunting for the uninitiated but the financial rewards can be significant.”

Portal Tax Claims’ research suggests that around 2,000 businesses who submitted this type of capital allowances claim to HMRC in 2012 would have received an average tax relief “pay-out” in excess of £36,000.

Allowances can often be found up to a value of 40%.

This Article was originally published on Cambridge News

By Jeanette Edmiston, Technical Manager at Portal Tax Claims

Capital allowances provide tax relief for capital expenditure on plant and machinery within a commercial property. The intricate details of capital allowances are not widely understood by the business community and law firms, where, being people-centred businesses, considerations about tax and plant and machinery claims often take a back seat. However, commentators agree that over 90% of commercial properties in the UK have unclaimed allowances within them.  (It is worth noting that where a law firm owns their own offices, they can, potentially, benefit from substantial relief).

The confusion surrounding capital allowances may be due in part to the complexity of the rules and case law that define the notion of ‘plant’, a term much broader than a simple reference to the more obvious mechanical items used within a business. Items on which businesses can claim tax relief include heating and lighting systems, normal and special power supplies, mirrors, fish tanks, statues, CCTV systems and artwork. air conditioning systems, lifts, carpets, door ironmongery and other ordinary fittings often found in  modern office spaces.  The result of making the claim can be considerable tax relief to set against profits.  In some cases, you can reduce the tax burden to the extent that some ‘overpaid’ tax in prior years could be refunded – a clear cashflow advantage.

The legislation relating to fixtures contained in the 2012 Finance Bill, has, since April of this year, introduced regulatory changes in respect of capital allowances claims for fixtures . These changes will have a significant impact not only on commercial property owners, but also on commercial property advisory teams, as they present a real opportunity to help clients achieve a cost saving. Conveyancing teams ignore the issue of capital allowances at their peril – the potential for negligence claims may become reality very quickly if clients lose out on valuable tax relief under the new rules due to lack of diligence on behalf of the professional advisor. Thus, the tax and legal implications of capital allowances are not to be overlooked both as part of the firm’s own tax planning and in the context of client services.

The practical implications of the new rules are fourfold:

• First, mandatory pooling of expenditure on fixtures will be a legal obligation in order to keep capital allowances alive. This will be phased in between April 2012 and April 2014, depending on whether the property has been in the same ownership prior to April 2012 or is sold within this timeframe.
• Secondly, the seller is required to pool any expenditure prior to the sale of the property. To be sure that full advantage is taken of the capital allowances opportunity, in cases where no prior claims have been made, it is advisable to make a capital allowances claim prior to the point of sale, thereby ensuring that a correct audit trail is in place and that an equitable agreement on the allocation of the claim is reached between the seller and the purchaser.
• Thirdly, a time limit of two years for the buyer and seller to agree on the value and apportionment of the allowances within a property will come into effect from the date of the sales transaction. However, the agreement on the allocation is best  reached, , prior to completion as part of the sales process.

Fourth, an election by the seller and the buyer as to the apportionment of capital allowances will have to be made using the current Section 198 (owners) and Section 199 (leaseholders) election processes. As before, this process has a time limit of two years from completion of the transaction for submission to HMRC.

This Article was originally published on Managing Partner

By Shaun Murphy, Managing Director of Portal Tax Claims

For many SMEs, Capital Allowances will already be familiar as a way of claiming tax relief on items used by the business, such as cars and computers. However, what most don’t realise is that the list of claimable items stretches far beyond this to unexpected and often unusual things. Businesses who understand the legislation regularly claim on items such as toilets, radiators, mirrors, air vents, and even statues. One person even tried to claim on a horse, although that is an extreme example.

Just as a guideline, a commercial property (such as an office, shop, hotel, pub, factory or similar) will typically contain around 30% of its purchase price in claimable items. It is estimated that over 90% of the UK’s commercial properties have unclaimed capital allowances hidden within them which, if unlocked, could provide a huge tax break to many SMEs and massively boost profit margins.

The amount of SMEs missing out on this is astonishing and if fully realised, this truly could be Britain’s biggest tax break.

Top 5 tips for managing your claim

1. Seek specialist advice. Many will rely on accountants in areas such as this, but sometimes specialist advice is needed. Accountants are a bit like GPs – they are faced with everything and therefore have an excellent broader knowledge, but have to refer clients to specialists where more in-depth expertise is required. The complex web of case law and legislation that is capital allowances is one such area and SME accountants can’t be expected to cover it all.
2. Don’t forget about improvements. If, for example, you are redecorating your restaurant in preparation for the Christmas season, remember that the cost of upgrades such as this can be offset against your profits over the period too.
3. Services as well as goods can count as qualifying expenditure. Invoices from plumbers, project managers, architects and others carrying out refurbishment, installation or construction work should be kept and considered when filing a claim.
4. Factor in capital allowances if you are buying a new building. In the heat of property purchasing negotiations, capital allowances are often overlooked. This can be a costly mistake as a detailed claim can provide you with a real cashflow boost when tax relief is granted, but only if a full claim has not already been made on the property.

Act sooner rather than later. Although you can still make a claim after the capital expenditure on plant or machinery has been incurred (providing you still own the assets), new legislation now being phased in means that you must pool the expenditure and make an election before you sell or make a statement of what value the fixtures in your property have. Don’t delay, or you could miss out.

This Article was originally published on Evening Standard

Capital allowances – a tax break available for businesses that invest in equipment and their commercial property – will be familiar to many entrepreneurs up and down the country. However, very few appreciate the full extent of the tax relief they are entitled to.

Research published by HM Revenue & Customs (HMRC) earlier this year demonstrated that less than a third of small and medium-sized enterprises understood the correct process for claiming relief for straightforward items such as computers or furniture for the office under the capital allowances rules.

Hotels and restaurants in particular could benefit hugely from capital allowances but are among the business sectors under-claiming the relief.

In the majority of cases, providing you have made a profit in the previous two tax years, a hotel or guesthouse will receive a lump sum of any tax rebate they are due from claiming the capital allowances. This can allow you to invest back into the business and suddenly a range of improvements – from guest room decoration, or renovation of communal areas and bars, to new booking systems and higher marketing budgets – are within your reach.

So why do allowances so often go unclaimed and how do you ensure you are not missing out on valuable tax relief?

Capital allowances generally arise from capital expenditure on purchasing or building commercial property, refurbishments and extensions to a property, or investment in plant and machinery. It is in relation to “plant and machinery fixtures” installed within their commercial property that businesses routinely miss out on tax relief as most simply do not appreciate the breadth of what could be claimed on.

In general, plant refers to “apparatus used for carrying on a business” and a huge range of items from air-conditioning equipment and generators to alarms and lighting systems can fall into this category. Case law demonstrates that even items such as paintings or sculptures displayed in communal areas and forming part of the ambience drawing customers in can be considered as plant when used for business purposes.

In one case we recently handled at Portal Tax Claims, a business running a hotel which was purchased for £748,800 was able to demonstrate £301,667 in capital allowances that were then used to make a claim against their taxable profits. Typically, capital allowances of about 30% or more of the purchase price of your hotel or restaurant property can be realised – a welcome helping hand from that unlikely benefactor HMRC.
Russell Cotton, Portal Tax Claims

www.portaltaxclaims.com

FIVE TIPS FOR MANAGING YOUR CAPITAL ALLOWANCES CLAIM

1 Don’t forget about improvements If you are upgrading your kitchen equipment to provide better service during the busy holiday period, or in preparation for a major influx of tourists for a particular event, remember that the cost of upgrades can be offset against profits over the period.

2 Services as well as goods can count as qualifying expenditure Invoices from electricians, architects and other professionals relating to refurbishment work or construction of a new building should also be considered when filing a claim.

3 Raise capital allowances if you are buying a new building Capital allowances are often overlooked in the heat of property purchasing negotiations. Even if a commercial property you are about to buy has already had allowances claimed against its fixtures and fittings, the issue is worth raising – you may be able to negotiate the price down.

4 Act sooner rather than later If you wish to take advantage of the allowances, you should act fast. Although you can still make a claim after the capital expenditure on plant or machinery has been incurred (providing you still own the assets), under new legislation you must pool the expenditure and make an application before you sell or make a statement of what value the fixtures have.

5 Seek specialist advice Many business owners would simply rely on their accountant to deal with any tax relief claims but capital allowances are plagued by grey areas of case law and legislation and need specialist involvement.

This Article was originally published on Caterer and Hotelkeeper

1. Link operations to property
The first step is to challenge the operational business on the amount of room it genuinely needs to perform its functions effectively, says Anna Dunne, real estate director at PwC.

“You shouldn’t be taking property costs out if it’s wrong for the operational business,” she says.

“But if you are looking for cost reductions you need to have a close working relationship between the property function and the operational business.”

Dunne says that there is a tendency for companies to take on too much space.

“There’s no real ownership of the property by the occupying business. Because they don’t pay for it directly, they have no need to question the use of it.”

She recommends taking a look at how working in offices could be changed to reduce the amount of space needed.

2. Consider relocating
Like Johnston Press, relocating to new premises could be an option if the costs of current space have become unsupportable.

But Matthew Purser, managing director of the London office of Studley, a commercial property services firm, says: “In many markets currently there is an over-supply of office space so good deals can be struck. Be sure to quantify any exit costs, such as break clause penalty payments and/or dilapidation and restoration payments to your existing landlord.

“Another important aspect is to check the balance sheet for any unaccounted capital spend associated with the existing premises. If there is, then a write-off will increase your relocation costs.”

3. Calculate the space you need
Every firm differs in the amount of space it needs for admin, conferencing, equipment and plant, points out Purser, who is also a committee member of CoreNet, a worldwide association for corporate property professionals.

You should also decide whether you need a smaller number of large floors or a larger number of small floors.

Purser advises: “If a firm is taking space on a premium floor to accommodate back-office operations, it may make sense to see if there is an opportunity to put those operations in below-grade space. This can reduce a firm’s overall cost of occupancy. If not, many firms have put these operations in off-site locations that can be close by or hundreds of miles away.”

4. Understand the lease
Companies sometimes sign leases without understanding the implications of all the small print, says Nick Rhodes, director of property and asset management company Roebuck Capital.

Sometimes, tenants are not aware of the lease’s charges, or when they are due, he says. “This often happens when tenants believe that the service charge covers all utility charges, including those from within their unit, when in fact it only covers common areas of the building,” says Rhodes.

“When carrying out new lease negotiations we ensure these are set out in a cash flow so that all charges are clearly illustrated to both sides. Any surveyor should be able to do this for you, and although not standard practice, it is definitely worth asking your surveyor to provide it.”

5. Ensure the lease has a break clause
“Ensure that any new lease that you are negotiating for premises has a tenant-only break clause where possible,” says Jane Pearsey, a consultant solicitor with law firm Setfords.

“Ideally, one break not too far into the lease in case the premises are not what was anticipated or income stream cannot sustain the rent.

“Any other break clauses should be not more than five years apart and ideally three, depending on the length of the lease, and should tie in with any rent review provisions. So if the rent is reviewed upwards to a level that is unsustainable, you can give notice and leave.”

6. Talk tough over service charges
“In multi-let buildings, make sure you know what you should and shouldn’t be charged for,” says Rhodes.

He cites the case of a company that took a lease on West End offices in London.

“We were aware that the air conditioning units would need replacing within the company’s five-year lease term,” recalls Rhodes.

“However, as these units typically have a lifespan of 20 years, we did not believe it was reasonable for our client to be charged the full replacement cost – more than £80,000.

“We therefore agreed a capped service charge at a reasonable level, securing a saving of £12,500 in one year for the incoming tenant.”

7. Claim capital allowances
“Capital allowances allow property owners and occupiers to offset the costs of expenditure on certain qualifying assets and construction work against their business’s taxable profits, reducing the amount of tax they pay and improving cash flow,” says Martin Dye, director of capital allowances and property taxation at construction and property management consultants RLF Optima.

“The rate of tax relief can vary from 100 per cent enhanced capital allowances (ECAs) for energy or water efficient technologies to eight per cent per annum for integral features, such as hard wiring and plumbing, so careful planning should be considered to maximise your relief.”

But not all companies recognise what they can claim.

“Low awareness of capital allowances means that businesses across the country are missing out on sizeable amounts of tax relief that can be claimed on the plant and machinery within their property,” says Jeanette Edmiston, technical manager at Portal Tax Claims.

8. Consider the potential of “intelligent buildings”
This involves installing high-speed IP networks that are capable of running a range of devices, such as CCTV, lighting and even power over ethernet. With a network in place, there are many cash-saving options.

For example, a meeting room booking system could be integrated with smart cards, motion or heat sensors and IP lighting. Power for the room switches on and off depending on whether people are in it.

With intelligent buildings, there are many other ways to save cash, but only after making a sizeable upfront investment.

This Article was originally published on Financial Management

Jeanette Edmiston, technical manager at Portal Tax Claims, examines the often overlooked issue of capital allowances and explains how they can benefit SMEs.

SME businesses are regularly hailed as the backbone of the economy and the key to the successful recovery of UK plc. Just like larger organisations, they have not escaped the economic pains of the last few years. However, help may be at hand from that most unlikely of benefactors – HM Revenue & Customs – as millions go unclaimed every year in tax allowances and reliefs.

One such underutilised tax break is capital allowances: tax relief available on investment into plant and machinery used in the business. Many will know the basics about capital allowances but very few claim them to the full extent. In fact, over 90 per cent of UK commercial properties are said to contain significant unclaimed allowances within them.

Who can claim and on what

Hotels, bars, factories, restaurants, offices and many more commercial properties are all potential treasure chests of capital allowances.

The savings can be particularly striking for many leisure sector businesses. In a recent case involving a hotel we found as much as 68 per cent of the total purchase price of the building could be reclaimed in tax relief.

Restaurants purchased as going concerns typically find allowances worth 40 per cent or more of the purchase price and the reality is that the vast majority of UK businesses are sitting on untapped capital allowances. On average, the relief equates to around 30 per cent of the purchase price paid, provided it continues to be used in the purchaser’s business.

Why does the percentage of unclaimed relief remain so high? The answer lies in the definition of “plant and machinery” in the context of the capital allowances legislation.

“Plant” is an incredibly broad term and can encompass such diverse items as carpets, mirrors and air conditioning units, depending on what business you are actually in.

In a long-running case against HMRC, JD Wetherspoon argued, amongst other things, that toilet cubicle partitions fall within the definition of plant when trying to claim allowances for pub refurbishment, so you can see how varied the items can be if you can make a case for why it is material to your business. Case law demonstrates that the definition of qualifying expenditure has been stretched to include bowling alleys, zoo cages and artwork in some situations.

How it works

In principle, claiming capital allowances is a simple process. Your property would need to be examined and the capital expenditure you have incurred analysed to extract the qualifying items and related costs. Then a report is sent to you or your accountant, which they can file with HMRC claiming tax relief on the proportion of the total expenditure on the building that relates to qualifying fixtures against your company’s taxable profits. It should be highlighted at this point that capital allowances will only be given on existing fixtures once.

Many lose out on tax relief by only claiming tax relief for the actual cost of the fixtures. Remember that a proportion of the expenditure incurred on fees and other incidental costs can be claimed too and, in some cases, some or all of the VAT can also be claimed.

This also applies to refurbishment, alteration, extensions and new installations, and can also include the cost of consultants for the design, project management and installation of the item, plus any specific costs you can attribute (for example, transportation costs or craneage costs). Small businesses need to be aware of this and should keep comprehensive records and itemised receipts to ensure they can take full advantage of the rules.

Conclusions

Many businesses have seen staff cuts in the course of the recession, with many of the remaining employees having to take on more work, and sometimes the pure administrative burden of identifying, recording and claiming these allowances can seem large to an already stretched team.

However, the rewards for doing so are usually more than worth it, particularly so for SMEs. The top accountancy firms already have dedicated teams that specialise in capital allowances, demonstrating the very real demand from national and international clients, but the truth is that the tax relief can make a much bigger difference to the margins of a family-run hotel in Manchester than to an international hospitality empire.