Businesses missing out

New rules on claiming allowances for commercial building fixtures mean many businesses risk seeing the value of their premises significantly reduced when they come to sell, while many are also failing to take advantage of the tax benefits related to ‘integral features’ according to Harris & Co chartered accountants Northampton who specialise in tax services and accounting services to small businesses.

Neil Tipping, senior tax consultant at global tax and accounting business CCH, said:

‘It is no exaggeration to say that the vast majority of commercial properties have embedded fixtures for which their owners and accountants have never claimed tax relief.’

Such fixtures include electrical and cold water systems, air conditioning, radiators, partitioning and external solar shading. There is no time bar on how far back the search for relevant expenditure can go.

Cases handled by CCH’s Capital Allowances Service have identified very substantial amounts of quantifiable expenditure. In one instance, a hotelier with five small properties identified unclaimed capital allowances exceeding £900,000 – almost 40% of the portfolio’s acquisition cost.

Tipping warns that changes in the Finance Act 2012 due to come into effect in April 2014, and a tougher line by HMRC under new rules that apply when properties change hands, mean that tax allowances for commercial building fixtures could be lost to a new buyer and all future owners.

Since April 2012, property sellers who have claimed or intend to claim allowances for integral features must agree a fixed value for the transfer. And from April 2014, sellers who have not yet claimed must also ‘pool’ – though not necessarily claim – these allowances to keep them alive for future owners. In both cases there is a two-year window of opportunity and other conditions apply.

Tipping said:

‘Failure to identify hidden capital allowances could destroy value and significantly reduce the market valuation of properties. These changes complicate an aspect of capital allowances that was already shrouded in confusion, and they raise the stakes for all involved in commercial property.’