On May 31st 2011 HM Revenue & Customs (‘HMRC’) issued a consultation paper proposing major changes to the rules that allow capital allowances claims for plant and machinery fixtures in buildings.
This will affect all property owner-occupiers and investors. The changes, if (as widely expected) passed into law, will come into effect from 6 April 2012. The proposals will force claims for capital allowances to be made within one year of when it is spent. If this is not done then no capital allowances claims will be available to either the original owner or any subsequent purchaser. It is likely that all expenditure incurred prior to that date will also be subject to this restriction.
HMRC is also proposing to require owners in future to submit a “record of agreement” for all purchases to show how much of the purchase cost relates to plant and machinery. All of this places the burden on the purchasers who need to make the claims within the periods outlined. These measures are very draconian and could mean that businesses and commercial landlords alike will miss out on allowances that they are strictly entitled to. Assessing what element of fixtures potentially qualifies can range from a review of a works schedule or quotation provided by the builder, to a more detailed survey of the premises.
We recommend that owners who have in recent years acquired new business premises, or have incurred costs on refitting and refurbishment consider their position, before the new legislation takes effect. There is something of a window of opportunity remaining for the tax allowances to be claimed. As well as the time limit restriction, changes in rates of Corporation Tax and a forthcoming reduction in the ‘writing down’ rates of Capital Allowances will dilute the value of such claims somewhat in future.
For fresh ideas, new possibilities and a value driven service go to Garside & Co LLP Chartered Accountants in London.