Make tax savings from property
4 March 2010
Recent changes to the rules surrounding Capital Allowances have created new opportunities, new restrictions and the closure of some relief opportunities.
The tax saving secret
Capital Allowances represent a little understood (and much under utilised) form of tax relief which is available to tax payers who spend money on commercial property.
When used effectively, Capital Allowances can create substantial tax savings - even on expenditure made several years ago.
So, don’t be too quick to dismiss money spent on commercial property. It might be the opportunity for some significant tax savings. In some cases it will create a tax refund from HMRC.
If you have bought, built or refurbished commercial property in the last few years, it may well be a profitable exercise to review your portfolio to ensure you have claimed the full amount of relief due to you. Unsurprisingly, HMRC will not alert you to any under claimed relief!
New opportunities, restrictions and withdrawals
Recent rule changes have created:
New opportunities
The introduction of a new rate of relief means that many assets which did not previously qualify for allowances have now become worth considering, especially in cases where the commercial property was bought since April 2008. The maximum potential claim has increased from 20% to 30% of the value of the transaction, which can be worth a substantial sum.
New restrictions
New restrictions relating to tax relief on furnished holiday lets come in from April 2010. After this date furnished holiday lets will effectively be treated as dwelling houses which do not attract Capital Allowances tax relief. Therefore it may be worth considering bringing forward any capital works on existing furnished holiday lets.
Withdrawal of some relief
Industrial buildings allowances tax relief (which includes hotels) is being completely withdrawn from 2011. This was the basic tax relief relied upon by many in these sectors. It allowed relief on virtually all capital expenditure incurred on these properties. The good news is that more extensive use of the other forms of Capital Allowances, such as relief for energy efficient assets or plant and machinery will, in many cases, make up the shortfall in relief.
CBW Roche property tax
CBW’s Capital Allowances specialists (CBW Roche) have dual tax/property qualifications and hence a unique understanding of the nuances of property improvement and development together with a deep understanding of the complex Capital Allowances rules.
Talk to myself or our experts if you’re interested in a review of the potential tax savings on your portfolio.
Andy White MA FCA
Partner, Carter Backer Winter LLP
t: 44 (0)20 7309 3917
andy.white@cbw.co.uk
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Make tax savings from property
