34 commercial property
Taxing times on commercial property acquisition
When Michael Palin famously walked into a pet shop to buy a Norwegian Blue parrot he would have been entirely focused on the excitement of his purchase with little thought to any other associated consideration. Matters soon escalated and, with the benefit of hindsight, and a little extra thought beforehand, it may have led to the purchase of a healthy parrot. This is much the same when considering entering into transactions in commercial property
There are potentially valuable tax savings to be achieved when buying a business premises which can sweeten the overall cost to a business of such a significant capital commitment. These include capital allowances: • Annual investment allowance – up to £500,000 for expenditure before December 31, 2015
• Energy saving plant or machinery – 100% • Plant and Machinery – 18% per year • Integral features – 8% per year: including electrical systems, cold water systems, lifts, solar shading.
However, significant changes to the capital allowances legislation in 2012 and 2014 could mean that no relief is due at all. It is now essential, if a purchaser is to secure capital allowances on the purchase of a second-hand building, that he agrees with the seller how the available capital allowances are to be allocated between them and this is recorded in the sale documentation.
Where expenditure qualifying for capital allowances has not previously been ’pooled’ by
the seller all is not lost as a motivated seller will be keen to assist in ensuring the sale goes ahead and can, where necessary, amend their capital allowances position.
Clearly if the deal has already gone through and the capital allowances were not included in the purchase contract, it may be necessary to rely on the goodwill of the seller to agree and retrospectively evidence the correct position to HMRC. One very real practical consideration is that the seller may not have kept detailed records of any claims made and, now the deal is done, will have no vested interest in the purchaser’s plight. There are still things that can be done for a limited period at this late stage to make a claim, but additional time and costs will inevitably be incurred and are best avoided.
We strongly recommend that during the course of the due diligence process on the purchase of a commercial property, that the capital allowances claims made by the seller on the building are reviewed by a specialist. They will be able
Tim Smith
to advise on what allowances are available, or of any actions that can be taken, before completion, to maximise a claim; after all, you may avoid acquiring a dead parrot.
The rates and reliefs stated do not take account of any changes that may have been announced in the Budget on March 18.
For more advice on capital allowances speak to Tim Smith or Sue Brown.
Details: Tim Smith
01256-486815
tim.smith@
bakertilly.co.uk
Sue Brown 01256-486856
susan.brown@
bakertilly.co.uk
www.bakertilly.co.uk
www.angusthomas.com studio@angusthomas.com Angus Thomas - Getty Celebrity & Entertainment
www.businessmag.co.uk
Image from the Jaguar Land Rover Retailer Conference & Ball, Edinburgh THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2015
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