Tax efficiency is a major pain point for many business owners who own property, have you considered every avenue possible?
The Tax relief you could be missing out on... Capital Allowances
14 May 2020
Capital Allowances are a great way to reduce the taxable income of your business and can result in a tax refund from HMRC. Most businesses claim basic Capital Allowances on plant and machinery, but many miss out on valuable lesser known Capital Allowances reliefs.
Below are some of the main areas that we see businesses missing out on these vital tax reliefs:
Expenditure on commercial property
Elements such as air conditioning, wiring, heating, lighting and security systems – we can review all expenditure that can be separately identified from the bricks and mortar to see what’s eligible for claiming.
So many times, we see claims that aren’t optimised and we’ve been able to improve the value of these claims by using our property team to assess the proportion of bricks and mortar vs fixtures and fittings.
Even better, if you think you have missed out, did you know that we can look back 20 years at what your business has spent?!
Revenue vs Capital expenditure
Drawing the line between what constitutes repair and improvement to your commercial property is a grey area, but an important one when it comes to making tax savings. Because there are no hard and fast rules from HMRC, often savings are missed or HMRC look at these as part of an enquiry, meaning lengthy processes of revisiting records.
So, what should you do? Firstly, you should check with your tax advisor that full tax relief has been claimed and that you mitigate the pain of having to look back and recall exactly what that invoice for ‘Building work’ was years later. We support business owners in:
- Implementing a simple and effective record keeping system to capture this information live
- Reviewing case law for unusual expenditure
- Analysing expenditure to provide certainty and reduce the risk of a lengthy and expensive HMRC enquiry
- Supporting businesses get the best information from their building work suppliers
Research and Development allowances
Annual Investment Allowances (‘AIA’) provide 100% tax relief for expenditure up to £1m. But, from 1st January 2021, the cap is reducing from £1m to just £200,000 per year and so, we’re encouraging businesses to consider other reliefs now.
Research and Development Allowances (‘RDA’s) are another 100% allowance that’s commonly overlooked, largely due to the current generosity of the AIA.
If your company is undertaking Research and Development then RDA’s will be available on expenditure incurred on equipment, machinery and other assets used to undertake the R&D activity.
But many people don’t realise that you can also claim on capital expenditure on buildings of facilities in which R&D activity is carried out. This can include buying, refurbishing or developing a facility that’s used for R&D and there is no cap on the level of expenditure that can qualify.
So, if you’re making an R&D tax credit claim for your R&D costs, you should also be considering the valuable RDA regime for your R&D investments.
Whether you’re a lessee or lessor, all types of leases such as finance, contract hire, operating or contract purchase contracts have different tax and capital allowance rules. This means a lot of businesses miss out on utilising these reliefs to the full. With such a variety of lease options, how confident are you that you are claiming the right amount of tax relief on your leased assets?
If you’re not certain that you’ve claimed all the available tax reliefs, then why not give us a call. We can chat you through the options and how likely you are to qualify.
For any business eligible for the SEISS grant, claims must be submitted by Monday 13th July... Have you done yours?