Tax relief removal will hit commercial property owners

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Commercial property owners risk losing substantial sums in unused tax relief in the coming financial year as a result of changes contained in the 2012 Financial Act which will come into effect from April 2014, reports accountancy services Harris & Co.

From this date, unless unclaimed capital allowances relief is identified and crystallised at the point at which commercial properties are bought or sold, it will not be claimable.

The analysis, produced by Catax, a capital allowances tax specialist, is based on the average number of commercial property transactions eligible for the relief, suggests more than £785m could be at stake because those involved in the transaction fail to take the necessary steps.

Mark Tighe, Catax Solutions managing director, said: ‘There"s no doubt whatsoever that a very large percentage of transactions will take place next year without this happening: the awareness simply isn"t there.

"Unfortunately, the loss of a sizeable tax benefit is only the start. Things are likely to get litigious for any party that oversaw the transaction — whether lawyer, broker, accountant or financial adviser — when their clients discover that they have lost potentially sizeable tax reliefs.’

Tighe warns that few of the parties involved in commercial property transactions are sufficiently up-to-speed with the impending changes to the tax regime. Of those that are, he argues that it will be difficult for lawyers or accountants on their own to calculate the value of the capital allowances that lie unclaimed in a commercial property, as this requires a detailed survey that is outside their area of expertise to identify potential tax allowances on items such as air conditioning or heating systems, lighting and security systems and plant and machinery.

‘The result is that a very large percentage of transactions are likely to take place next year where all unclaimed capital allowances relief is lost to either the buyer or seller forever. And this will carry on during the following tax years unless awareness of this area of tax improves,’ Tighe said.

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