We work with a quantity surveyor specialist who maximises tax allowances available on the acquisition and disposal of buildings.
£54k saved for nursing homes client in “year one”
Our new client owns and operates nursing homes. Our client built a new 50-bed nursing home which cost around £1.6M. The previous accountant treated the entire cost as “Freehold land and buildings”.
We identified the potential for claiming capital allowances. Our quantity surveyor specialist visited the premises and produced a claim comprising all the plant and machinery incorporated within the fabric of the building such as under-floor heating, en-suite facilities, air-conditioning, state-of-the-art kitchen etc.
The eventual claim was for around 28% of the build cost and is worth around £450K at a 30% corporation tax rate. The “year one “ saving was £54K.
Warehouse owner saves £22k in “year one”
Our client personally owns a recently built warehouse which is let to a company in which he owns most of the shares. No claims for capital allowances had been made in our client’s personal tax return for any of the three years in which the warehouse had been owned since originally built and acquired for around £860K.
As the company uses the warehouse for commercial printing purposes, it was possible to make a claim for industrial buildings allowances over the remaining twenty two years tax life of the building.
Our quantity surveyor specialist then visited the warehouse and produced a claim for plant and machinery capital allowances inherent within the fabric of the building comprising electrical, heating, ventilation, plumbing, furniture etc. This claim was for around £85K.
As a result of these claims, our client was able to achieve 40% tax relief on the whole cost of the building. After allowing a deduction for the land value, this claim will produce total tax savings of around £240K over the 22 years remaining tax life. The claim for plant and machinery capital allowances enabled the “year one” saving to be around £22K.
Claims on building extension reduce client’s tax liability by £12k
Our Doctor client extended his surgery at a cost of £135K. We analysed the contract paperwork and claimed plant and machinery allowances of £30K, reducing our client’s tax liability by around £12K.
Exploiting missing “clawback” election
Our client acquired an office block for around £500K and our quantity surveyor specialist produced a claim for plant and machinery allowances for around £100K yielding tax savings of around £40K.
As no clawback election had been signed, the vendor will, in due course, be contacted by the Revenue and told to introduce disposal proceeds of £100K establishing a tax liability of up to £40K. The vendor has no defence against this request – other than claims against his professional advisors.
The clawback election prevents a purchaser of a “used” building claiming capital allowances. It must be signed by the vendor and purchaser and lodged with the Revenue within two years.
Acquisition of industrial shed
During March 2005, a company became aware of an industrial shed being offered for sale by a large multi-national. Negotiations progessed and a price of around £3 Million was agreed. During March 2006, just before exchanging contracts the vendor notified the company that the capital allowances and industrial buildings valuations would be £1 each with the balance of the sale price being allocated to land value. There is no immediate tax relief for expenditure on land.
The company was aware of our specialism in capital allowances and appointed us to act on their behalf.
We liaised directly with the Board, the land agent and the Company’s solicitor and managed to arrange the following changes to the contract:
(i) The contract value attributed to plant and machinery was increased from £1 to £250,000. This will trigger around £75,000 of corporation tax relief over the next few years.
(ii) The contract value attributed to the building was increased from £1 to £1.9 Million. This will trigger around £525,000 of corporation tax relief over the next nine years.
(iii) The acquisition was made by a new group company rather than the trading company. The advantage being that if the property was sold, there would be an opportunity to structure the deal as a share sale, thereby preventing the clawback of substantial tax allowances.
The sale completed on schedule in April 2006.
Sale of commercial property
A local practitioner accountant requested our assistance with the sale of a care home and its trade by his client and we suggested that an anti-tax relief clawback election be agreed with the buyer.
We provided all the documentation to the client’s solicitor thereby protecting the client from over £100,000 of potential tax charges if the clawback election had not been agreed.
