capital allowances claims ppa
TRANSCRIPT
Is this a scheme or loophole?
• Capital allowances date back to 1870’s• Capital Allowances Act 2001• Decades of case history• Interpretation is constantly refined
Accounting Practice
Revenue Expenditure V Capital Expenditure
Make sure he mentions property developers in this bit! If he doesn’t please remind him.
Profit & Loss Account
Sales £ 1,100,000Cost of Sales £ 600,000Gross Profit £ 500,000ExpensesWages £100,000Repairs £ 50,000Marketing £ 50,000Gas £ 25,000Electric £ 25,000Other £ 50,000
£ 300,000 NPBT £ 200,000
Net Profit Before Taxation £200,000
Capital Expenditure on Plant & Machinery £50,000
Main Rates Pool £50,000 (WDA 18%)Annual Investment Allowance £25,000
Capital Allowances Available = £25,000 (AIA)
Main Pool £50,000 - £25,000 = £25,000 x 18% = £4,500
Capital allowances available in the year £29,500
Applying Capital Allowances
Tax Benefit
Net Profit Before Taxation £200,000
Capital allowances available £ 29,500 Pays Tax on £170,500
Tax saving @20% tax would be £4,900 @40% £9,800
What is capital expenditure?
Brings into existence (or improves) an asset with an enduring benefit to the trade.
(British Insulated & Helsby Cables v Atherton)
Plant & Machinery (P&M)• Machinery has the ordinary meaning you
would expect.• Plant– Could include any asset that is used in the
business of the taxpayer that supports the trade and is not trading stock or the premises in which the trade is carried out.
Examples of Plant Electrical Systems Sanitary Ware
COLD WATER SYSTEMS Heating Systems
Ventilation Lifts Escalators Moving
Walkways
Thermal Insulation External Solar Shading
Kitchen Equipment Signage Art Work? Safety Equipment Electronic Barriers
CCTV
Artificial Turf
BIKE RACKS FIRE ALARMS & SPRINKLER SYSTEMS
Beehives FREEZERS AND FRIDGES AerialsFloodlights Movable Partitions
ASSOCIATED COSTS COLD STORES
Sound Equipment
MEZZANINE FLOORS SUPPORTING PLANT
How does this apply to Commercial Property?
• New Build / Refurbishments / Extensions• Second hand freehold purchases:-
No Time limit on making a claimClaim for original purchase and improvements
• LeasingClaims for major refurbishments / extensions
ALL COMMERCIAL PROPERTY THAT IS OWNED WITH THE INTENTION OF MAKING A PROFIT ON WHICH TAX WILL BE PAYABLE. INCLUDES FHLS BUT NOT RESIDENTIAL PROPERTY SUCH AS BUY TO LETS.
Why it’s worth making a claim?
Retail / OfficesPurchased 2008 - £1.25mCapital Allowances - £302.5kTax Benefit @ 40% - £121kImmediate Saving was £27k
Furnished Holiday LetNew Build 2007 - £630kCapital Allowances £254kTax Benefit @ 40% £116kImmediate Saving was £25k
Why do claims not get made?Solicitors:-
- CPSE1 Form - Section 19- S198 Election Agreement
Accountants Misconceptions:-- Chattels claimed but not fixtures / integral features.- Purchasing contract binding on parties- Capital allowances claims effect CGT on sale- Claw-back of benefit at later date
What does the future hold?
• Post April 2012 - Pooled expenditure - S198 Agreement - First-tier Tribunal• Post April 2014 - Pooling requirement - S198 Agreement or first-tier tribunal - Entitlement lost for all.
Which capital allowances claims company?
- At least one or two partners are dual qualified as :-
- No Claim = No Fee.- Initial High Level Review.- They take responsibility for the final report not the
accountant.
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