Your business is relocating but you’re still at the negotiation stage. To secure extra tax deductions for plant, fixtures and fittings in the property, what should and shouldn’t you be saying to the seller?
Trade secrets
For many years there’s been a sector of the tax advisory industry that specialises in finding opportunities to claim extra capital allowances (CAs) hidden in business premises. It involves identifying plant and machinery (P&M) which is attached to or is part of a building. Tax savings can still be made despite a tightening of the rules in 2012 and 2014.
Capital allowance opportunities
There are two common situations where there might be opportunities to claim CAs. They are where your business has occupied the same premises since before April 2012 (and especially prior to April 2008); and if you’re moving to different premises or acquiring an additional one.
What are you looking for?
CAs can be claimed for most types of equipment used in a business, but when you buy a property you should make a thorough examination of the building, inside and out, for items which the seller can’t take with them because they are part of the structure. This might be something obvious such as a mechanical hoist or not so visible items, such as air conditioning systems and other integral features. It’s common for a seller to have overlooked a claim.
Tip. Because of HMRC’s anti-avoidance rules you must identify items on which CAs can be claimed before you complete the purchase of a premises. You’ll then need to compare notes with the seller to identify if there are unclaimed items. However, don’t rush into this or you could hand possible tax savings over to the current owner of the property.
Step two – be cautious
If you simply provide the seller with your list of items qualifying for CAs, they might thank you for your effort, claim CAs for anything they’ve overlooked and receive the tax savings from your hard work.
Tip. Early in the purchase process ask the seller to give you a list of P&M included in their CAs records. If your list includes other items it gives you room to negotiate over the tax savings. For example, offer to provide your list, but only if they agree to split the tax savings from the extra CAs or reduce the purchase price of the property.
Tip. If the seller occupied the property before April 2008, ask if there were any integral features fitted in the building prior to this. A quirk in the rules means that they aren’t entitled to claim CAs for these but as the new owner you are.
Get expert advice?
Unless you know the tax rules in depth, spotting which items qualify for CAs will take you an age and you’re still likely to miss some. Therefore, ask your accountant if they can help and how much their fees will be. However, because this is such a specialist area they might recommend you contact an expert in the field.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.