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Archive for the ‘Budget News’ Category
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Thursday, December 20th, 2012
Amidst the gloomy outlook following the recent budget, there is good news for businesses / commercial property owners…
- Plant and Machinery Capital Allowances on commercial properties remain unaffected, and are still available to claim.
- An accelerated Capital Allowances incentive has also been introduced for aviation specific industries.
Contact CapAll today to arrange your Free Capital Allowances Review. You could be entilted to tax rebates / tax relief.
Merry Christmas from all at CapAll Solutions!
Tags: Capall, capall solutions, capital allowances, Commercial Property, Irish Budget, Irish Budget 2012, Plant and Machinery Allowances, Property Tax Rebates, Property Tax Relief
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Wednesday, February 22nd, 2012
Introduction
HMRC undertook Formal Consultation between 31st May and 31st August 2011, to gather information from stakeholders and establish how to proceed with proposals for changes to legislation on Capital Allowances for fixtures as laid out in the previous budget.
• The objective of the new policy is to ensure that ‘expenditure on a fixture can only be written off once against taxable profits over its economic life’.
• Businesses disposing of or acquiring property are most likely to be affected by the changes.
Current Position with regard to Capital Allowances for Fixtures
Capital Allowances are used to provide tax relief for the depreciation of certain capital assets, mainly plant and machinery, including most fixtures in a building used by a business. The allowances are calculated as a percentage of the Capital Expenditure incurred and are deducted from the income / profit of the business.
The current legislation contains rules to limit the allowances that can be given to the lower of the original cost (section 62 CAA) or the last disposal value (section 185 CAA). However, current law does not prescribe when expenditure on fixtures should be pooled, and as a result there is no time limit to constrain when a seller and purchaser should agree the part of the sale price of a property that should be attributed to fixtures.
This has created a problem for HMRC as it has led to late claims by owners at a time when a single sale value for fixtures can no longer be agreed and brought into account by both parties. As a result of this HMRC were concerned that, due to perceived defects in current rules, tax was being avoided. Due to lack of historical data there was potential for Capital Allowances to be claimed on more than the original cost of the fixtures, or for Capital Allowances to be claimed twice (once by previous owner and once by purchaser) contrary to policy intent.
Changes to Capital Allowances System
The legislation to be included in the 2012 Finance Bill will make the availability of Capital Allowances to a purchaser conditional on:
1) Previous Capital Expenditure on qualifying fixtures being pooled (new capital expenditure added to unrelieved expenditure) before a subsequent transfer to another person;
2) Seller and Purchaser using 1 of 2 existing procedures to fix agreement regarding the sale of fixtures;
a. Joint S198 election;
b. First Tier Tribunal facility to agree value if both parties can’t agree within 2 years;
3) In exceptional circumstances, the Past Owner providing written confirmation of the disposal value of the pool that he / she had sometime earlier been required to bring into account, within two years of a later sale of the property.
The legislation will also include a technical amendment to enable plant and machinery capital allowances to be claimed by a new owner on any fixtures expenditure to the extent that this has not already been relieved under the BPRA scheme (Part 3A, CAA).
The new rules will take effect from April 2012, though there will be a transitional period to assist in implementation of some elements of the new rules until April 2014.
Tags: capall solutions, capital allowances, fixtures, hmrc, property tax, tax
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Tuesday, June 14th, 2011
HMRC have issued a Consultation Document proposing significant changes to the way Capital Allowances claims for Plant and Machinery fixtures are handled.
HMRC’s Reasons for Change…
- HMRC believe that some vendors / buyers neglect to agree a sale price for fixtures, and therefore may insert different values for the same fixtures in their respective Capital Allowances Claim;
- As expenditure on fixtures can currently be pooled some years after the fixtures were acquired, HMRC may not have the means to check what the original values were – e.g. original vendor may no longer be trading etc.
- Issues surrounding late claims lead to a lack of clarity on what has been claimed, and enable some Capital Allowances to be claimed more than once on the same fixtures;
- HMRC’s proposed new requirement for agreement on fixtures sale price, and formal notification from the buyer and seller is designed to overcome the current lack of information.
- The imposition of a 1-2 year deadline for CA claims is designed to ensure that the information is still available within the open accounting periods of the vendor and buyer.
Key HMRC Proposals:
The proposed changes, detailed in brief below will have significant consequences for all businesses and commercial property owners and investors.
- Vendor and Buyer will agree the apportionment of purchase price attributed to fixtures and formally notify HMRC of this apportionment;
- Mandatory Pooling of Fixtures – businesses will be required to pool their expenditure on fixtures within a short period of time after acquisition in order to qualify for Capital Allowances;
- The time limit proposed for pooling is 1-2 years after acquisition;
- The use of CAA 2001 s198 tax elections will be prevented;
- HMRC are also proposing the enforcement of a requirement that businesses pool all historical expenditure within 1-2 years of the new Mandatory Fixtures rules commencing;
- The above changes are currently in consultation (until 31st August) and HMRC intend to include the legislation in the 2012 Finance Bill.
What Next?
Contact CapAll Solutions for specific advice relating to the proposed new regulations.
Currently the proposals are under consultation and do not prevent additional claims being made before properties are sold – although it is likely that a 1-2 year period for submitting such claims will be imposed. We would therefore advise giving urgent consideration to making claims now where no claim has previously been made, or where under claiming has occurred.
Other tax planning opportunities such as considering transferring properties within group companies with CAA 2001 s198 elections for £1 to ensure all the capital allowances that have been claimed are retained. Going forward the tax written down value may need to be passed to the purchaser on sale of the property.
CapAll Solutions offer a FREE CAPITAL ALLOWANCES REVIEW to all commercial property owners.
In the light of current uncertainty, it is advisable to have your property or your client’s property reviewed to ensure that this valuable tax relief is not lost.
In a few months time it may be too late!
Contact:
Lisa Mulkerns or Manus O’Hagan or 028 30265662.
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Thursday, March 31st, 2011
Annual Investment Allowance (AIA)
The annual Investment Allowance (AIA) allows most businesses, regardless of size, to reduce their taxable profits by the full amount of their annual capital expenditure on most plant or machinery (apart from cars) up to a maximum amount, which is currently £100,000 a year.
All businesses currently benefit from immediate tax relief on the first £100,000 a year that is spent. However from 1st April 2012, this allowance is being reduced to allow tax relief only on the first £25,000 spent.
Now is therefore the time for businesses to look at their capital spend plans to make sure costs are incurred in the period in which most relief will be generated.
Plant and Machinery Rate Reduction
• From 20 per cent to 18 per cent per annum for expenditure in the main rate pool; and
• From 10 per cent to 8 per cent per annum for expenditure in the special rate pool.
Expenditure on long life assets, thermal insulation, integral features and cars with emissions of 160g/km or more (in the case of cars purchased on or after April 2009) is allocated to the special rate pool.
These rate changes will take effect from 1 April 2012 (for corporation tax) or 6 April 2012 (for income tax).
Fixtures Mandatory Pooling
The Government are considering introducing a requirement that businesses pool their expenditure on fixtures within a short time after acquisition. The consultation on ‘Fixtures Mandatory Pooling’ is scheduled for May 2011, the extent of these changes will be clarified then.
It is important to be aware of this potential measure, and plan for claiming latent Allowances sooner rather than later to ensure no tax relief is lost.
Other Capital Allowances News
100% Enhanced Capital Allowances Regime will expand to include new technologies;
Business Premises Renovation Allowance to continue for 5 years;
Capital Allowances for Flat Conversions to be abolished;
Land Remediation Relief to be abolished.
The Future for Property Tax Relief…
From April 2012, many Capital Allowance Property Tax Reliefs will be reduced.
It is important to have your entitlement professionally reviewed in order to ensure you derive maximium benefit from Capital Allowances.
The time to maximise the opportunity is now!!
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Wednesday, February 23rd, 2011
The Finance Bill temporarily halted proposals to curtail tax relief to some groups of property investors; these are now subject to an economic assessment of their impact…
Implementation of Budget Measures?
There was strong criticism of the Budget proposal to change Capital Allowances and restrict property based incentives.
The recent Finance Bill makes the Property Restrictions subject to a Commencement Order. Delivering the 2011 Bill, the Minister for Finance observed that a wide range of concerns had been expressed regarding the potential effects on the real economy, and on employment in particular. Given these concerns, the government decided that an economic impact assessment should be taken in advance of the commencement of budget provisions.
The new measures are due to come into effect on 1st January 2012 by way of the afore-mentioned Commencement Order which will be made by the Minister for Finance. However, it is not yet known who the Minister will be at the time, and it is recognised that he/she may decide not to proceed with the implementation of restrictions in the manner laid out in the Bill.
The future for property Tax Relief…
The proposed cuts may have been temporarily halted; however, the fact remains that some Capital Allowances could still be phased out within as little as 11 months. Note, the intention to impose cuts has been signaled; now it is possible that other property tax incentive schemes may follow…
Therefore it is important to have your entitlement reviewed to ensure that your clients, or your company do not ignore this valuable relief. CapAll Solutions can survey the construction of your property and calculate the embedded plant and machinery costs and subsequent tax relief that you are entitled to.
Do not miss out on your Free Review – it’s too late when the Tax Relief is abolished!!!
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Thursday, June 24th, 2010
Property and Construction Overview
Billed as a ‘tough but fair’ Budget, Chancellor George Osborne has announced his plans to tackle the UK’s record deficit while sustaining the economy.
Mr Osborne set the scene for his first Budget by stating that “the country has overspent, it has not been undertaxed…”. In addition to sweeping changes to Government spending, he also announced some landmark changes to the taxation system.
- 20% main VAT rate to be introduced on 4 January 2011, with continued exemptions for essential goods.
- Rate of Capital Gains Tax to increase to 28 per cent for higher rate and top rate income taxpayers (basic rate taxpayers rate to remain at 18 per cent)
- Companies were given the positive news that the main rate of Corporation Tax would be reduced by 1 per cent every year for four years to 24 per cent, starting in April 2011. It currently stands at 28%. For small companies the rate is to go down to 20% (from 21%).
Media speculation prior to the Budget had suggested that the reduction in Corporation Tax would be paid for by the removal of tax reliefs such as capital allowances, although this has proved unfounded. There will, however, be a reduction in the speed at which the tax savings associated with some capital allowances are realised, albeit these revised rates will not take effect until April 2012:
- Plant and Machinery : annual allowance reduced from 20% to 18%
- Integral Features and Long Life Assets : annual allowance reduced from 10% to 8%
- Annual Investment Allowance : annual allowance reduced from £100,000 to £25,000
On another positive note, the 100% Enhanced Capital Allowances for certain energy and water efficient assets still remain with further qualifying categories being added this year.
Opportunities
Capital Allowances
As stated above the overall structure of relief available from capital allowances has not been altered. The rate at which this benefit is realised has been reduced slightly, and will not be effective until April 2012. For any current or historic expenditure on qualifying plant and machinery there is an obvious advantage in making any claims in the earliest return available.
From April 2012 it will be more important than ever to seek specialist advice to maximize the value and cashflow benefit of the valuable tax relief available via capital allowances.
VAT
For certain industries / sectors such as dentists and care service providers who are unable to register for VAT there is a short window, prior to 4 January 2011, to make VAT inclusive purchases for goods and services at the current rate.
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