Property Developments
A common misconception is that certain types of assets automatically qualify for particular types of allowances, and that a claim consists of no more than assembling and presenting self-evident facts (i.e. following a tick sheet). In reality, the process is much more complicated.
To get the most benefit from capital allowances, Capital Allowances claims and their process for preparation must be planned. It is often not understood, that capital allowances are effectively a negative element of the total cost. Failure to fully exploit allowances will therefore effectively increase the post-tax cost of, say, a building, just as surely as if there had been a failure to identify the most competitive construction or fit-out tender.
Property developments provide a unique opportunity to bring a capital allowance specialist onboard at the outset to help develop this process and improve the potential capital position in respect of developments. Indeed, it is often possible to improve a capital allowances claim by as much as 5% to 15%.
Key elements include:
- Examination of the building project elements together with its proposed use and offering advice on how best to achieve a more tax efficient design.
- Ensuring that grants (or other contributions) are allocated to items that offer a minimal or zero tax benefit.
- Advice on the structure and preparation of construction cost information.
- Ensuring that fees and preliminaries pertaining to qualifying items are priced separately.
A further consideration, for accounting periods ending on or after 1 July 1999, is the extension of the self-assessment regime to corporate tax-payers. Responsibility for the correctness of a capital allowances claim falls more squarely on the taxpayer than ever before, with penalties for claims proved to be incorrect as a result of negligence. As a result, it is now even more important to ensure that sufficient back up of cost information is available and that capital allowances claims are made for expenditure incurred in the client correct accounting periods.
Claims that have the benefit of a capital allowances specialist not only will provide a greater level of allowances but also facilitate quicker settlement with the claimant company/individuals Inspector of Taxes and thereby mitigate risk exposure to unexpected penalties and interest charges.
