The New Year seems like a good time to remind commercial property owners that a little known deadline is rapidly approaching.
As much as £80bn in tax relief is being left unclaimed, according to research, and any left unclaimed by April will be lost for good.
Under the UK’s capital allowances scheme, all commercial buildings are entitled to tax relief on any fixtures or equipment that are bolted to the walls. In hotels these could include lighting displays and radiators and in offices such things are air conditioning units, lifts and even cabling.
Now the tax advisors and accountants, Deloitte, claims that 96 per cent of property owners and investors are either unaware or failing to take advantage of this allowance — leaving between £70bn and £80bn untouched in the Treasury coffers.
But this financial year is the last chance for commercial property owners to claim the untapped billions. Under the 2012 Finance Bill, those who have not applied for the tax relief by April next year will lose all rights to the allowance forever.
“After April, if you are selling your commercial property and you haven’t identified the available allowances before you sell, put them into your accounts and notified HMRC, all allowances are lost for good, and that goes for the seller, the buyer and any buyer further down the line,” Mark Tighe, of Catax Solutions, explained.
“Usually, when buildings are bought, the new owner has no idea how much cabling is inside the walls or how much it’s all worth,” added Tighe, whose firm specialises in securing tax relief for commercial property. “Their accountants and company lawyers just ignore it because they don’t understand it.”
The complexities of this particular form of tax relief are so time consuming that many companies consider it too daunting even to start the claim process. For one thing, the owner must prove that the relief hasn’t been claimed previously, as only one owner is able to take advantage of the tax relief during the lifetime of the building.
There will certainly be a backlash when property investors realise what they have lost out, claims Tighe. He believes that next year’s new finance rules will trigger a landslide of court cases as “companies and individuals start to band together to bring actions against accountants and solicitors for negligence”.
First introduced after the Second World War as a way to stimulate the economy, the Government announced the changes to the capital allowance system last year.
After the April deadline there will be a legal obligation — phased in between April, 2012, and April, 2014 — to pool all expenditure on fixtures in order to keep capital allowances alive for future claims.
The new rules also require that the seller of any commercial property pool any fixtures prior to the sale of the property. This will mean the compilation of a capital allowances report to ensure there is a proper audit trail and that both seller and buyer reach an equitable agreement on the allocation of any claim.
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