Introduction Many businesses are missing out on tax allowances that protect income against tax, and you could be among them. It’s estimated that the majority of owners of commercial properties haven’t claimed because the dormant tax benefit in embedded fixtures & features is often overlooked.

In addition, changes in the Finance Act from April 2014 also mean that tax allowances for commercial building fixtures could be lost to a new buyer and all future owners! You may not have heard about this property relief because it requires a specialist surveyor and tax expert to review your buildings and books. Has your property been surveyed by a tax specialist, room-by-room? When a property changes hands there was previously no requirement for sellers and purchasers to agree a single disposal/ acquisition value for “property embedded fixtures and features” (PEFFs) within the overall sales price.

What’s more, there is currently no time limit on when, if ever, PEFFs are added to the capital allowance pool. However, all that is about to change! It is important to understand how these changes will affect entitlement to capital allowances for PEFFs.

If not understood, commercial property owners will lose substantial tax relief and advisors risk the consequences, which may result in ‘Professional Indemnity’ policies being tested.

The case for specialist help

Capital allowances are an important tax benefit for commercial property owners. For a typical business, a Property Embedded Fixtures & Features consultant will be able to identify capital allowances of around 20–25% of the base cost of the property, bringing a tax benefit worth tens of thousands of pounds, even to smaller businesses. There is a strong case for employing specialist consultants, especially when the new rules make it so easy to lose entitlement altogether.

For most accountants, a review normally begins and ends by analysing invoices and following a paper trail. A Property Embedded Fixtures & Features expert will visit the property in person and identify items that have not been captured in any paperwork. In this way, a capital allowance expert adds value to the work already done by a good, but non-specialist, accountant.

Substantial tax savings

The tax savings that a capital allowance expert can uncover are significant. Many of the cases we work on show unclaimed allowances of over 80% of entitlement, even for businesses that have already received help from professional advisers. In nearly all our cases, businesses have been claiming less than 50% of their entitlement.

Subject to the new pooling requirement coming in 2014, there is no time limit for retrospective claims so that a claim started today could take into account many years of investment in plant and machinery, generating tax savings on each and every item that was neglected when past claims were made. This historic entitlement creates a major opportunity for boosting a business’s present day finances so that unclaimed capital allowances can be a key contributor to a company’s resources.

When a commercial property is sold, large amounts of capital allowance change hands, often without either party being aware that they have either given away or acquired a valuable asset.

When buying or selling a business, taking unclaimed capital allowances into account can make a significant difference to the overall value of the deal:

• From a seller’s perspective, the unclaimed capital allowance is a benefit that could be offered to a potential purchaser as a sweetener, to help move the deal along.
• From a purchaser’s perspective, knowing that a large allowance claim can be made on transfer substantially alters the net cost of the purchase and can make an otherwise unaffordable deal attractive.

In difficult markets, understanding the value of these unclaimed capital allowances can be key to securing a sale or affording a purchase.

If you wish to discuss further please do not hesitate to contact us.