UK commercial property owners are sitting on an estimated £1bn in unclaimed tax relief, according to capital allowances specialists, Catax Solutions. But a sizeable proportion of that unclaimed tax relief is going to be lost forever, starting on 1 April 2014 when the 2012 Finance Bill will finally be implemented following a 2-year transition period.
For any individual or business that owns commercial property, this date is vital: from that moment on, unless unclaimed capital allowances are identified and documented at the point at which commercial properties are bought or sold, they will be lost, forever.
Very few of the parties involved in commercial property transactions — the owners, lawyers, financial advisers and accountants — understand the impending changes to the tax regime. In some cases they are not aware of it at all.
The result is that a very large percentage of transactions are likely to take place this year where all unclaimed capital allowances relief is lost to both the buyer and the seller. And this will carry on during the following tax years unless awareness of this area of tax improves.
What are capital allowances?
In plain English, capital allowances are a form of tax relief available to anyone who incurs capital expenditure buying, building or refurbishing commercial property. In short, they are a means of reducing your tax bill.
Most recently, research has shown that more than 9 in 10 UK commercial property owners will be owed a significant tax rebate in the region of thousands, or even tens of thousands, of pounds. And as hotels, restaurants, and bars are considered commercial property, this applies to them.
Mark Tighe, Managing Director, Catax Solutions commented:
“Unless they sit up and take note of the legislative changes that are now upon us, Britain’s commercial property owners will be haemorrhaging tax relief in the coming financial year — and every year thereafter.
“If capital allowances aren’t identified and documented at the point of sale then they will be lost forever, meaning a loss of thousands, tens of thousands or even hundreds of thousands of pounds to the buyer or seller. And right now, there’s no doubt whatsoever that a very large percentage of transactions will take place this year without this happening: the awareness simply isn’t there.”
Over 98,000 non-residential property transactions took place in the tax year 2012/2013** – 10,000 of which qualify for a capital allowances claim – the lucrative tax relief that allows you to claim back tax on the fixtures in your property.
Tax relief in real terms for the hospitality industry
For hotel, pub and restaurant owners, there’s a great awareness of the expenditure involved in fitting these items given the need for extra electrics, lights, sprinkler systems, air-con and plumbing in each room.
To put this into practice, acting on behalf of a privately owned country house hotel and restaurant of 19 bedrooms, Catax Solutions recently uncovered well over £400,000 in capital allowances, including
- £32,000 for disposal and drainage installations
- £35,000 for water installations
- £95,000 for heating installations
- £130,000 for electrical fittings
- and over £68,000 for fixed internal fittings
So clearly there are significant savings to your tax bill to be made – and it’s not just the preserve of large hotels, the company also uncovered a similar figure of £411,000 on behalf of a boutique converted country home.
In real terms, the benefit to the 40% tax payer that owned this property would be in the region of £164,000.
Capital allowances are a right and not a privilege; if those in the tourism industry have purchased a hotel and/or have made significant improvements to it, they deserve the tax benefit. And for those who have dealt with the effects of the recession for the last few years, a tidy sum from the Inland Revenue would be a great advantage.
About Catax Solutions
Catax Solutions is a UK-based capital allowances specialist that identifies unused capital allowances on behalf of owners of UK commercial property. To date, it has arranged more than £500m of tax relief for over 4000 clients.
For more information about Catax Solutions click here
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