Buyer and Seller Beware
Capital Allowances Claims - I am not an accountant but nobodys perfect.
This blog brings me back to a favourite topic of accountants and their reluctance to engage with specialist capital allowances firms for the benefit of their clients who own commercial property. Having now worked with some of the top specialist capital allowances professionals for the past year and spoken or corresponded with accountants working at all levels. Here are my conclusions (in no particular order).
1) "I can't admit that I haven't picked up on this"
Some accountants are fully aware of the potential for making a capital allowances claims for their clients but have only come to this realisation in recent years. They are now in that awkward position where they have had a client for a number of years who owns commercial property but they have not advised them to make a capital allowances claim. Result they keep quiet and hope that the client either never talks to a specialist of if they do will not believe them over their accountant.
2) "I'm not letting a third party anywhere near one of my clients"
Accountants are worried that if they advise a client to use a third party capital allowances specialist that there is a real reputational risk. The accountant perceives that if the capital allowances company makes a mistake this will reflect badly on them and their practice and that they could lose their client. This is a tangible concern and there are some capital allowances claims companies where you an accountant could run this risk. However my advice would be that like any other organisation that relies on an outside provider if you do your homework thoroughly it does not take long to realise who are the experts and who are not.
3) "Any advantage the client gets now will just be clawed back at a later date by the tax man"
There are so many misconceptions about capital allowances claims that it is not possible to list them in this short piece. One of the most widely held is that undertaking a capital allowances claim devalues the property and therefore when it is sold it will be subject to a higher level of Capital Gains Tax. The first statement is untrue and therefore so is the second. If anybody wants to know the legislation that explains this in more detail please let me know and I'll e-mail the evidence.
4) "There is not enough in it for me"
Although it may be in their clients interest accountants point out that the time they have to spend devoted to dealing with a capital allowances claim could be better spent making more money for themselves elsewhere. Even though most capital allowances specialists are happy to pay over commissions to accountants they look at in terms of the value they will gain rather than their clients.
5) "I look after my clients capital allowances claims already"
This can be born out of a lack of understanding of the full scope of the Capital Allowances Act 2001 and the full interpretation of "plant and machinery" and "integral features" as they relate to commercial property. Accountants are very conversant with the claiming of things such as furniture, carpets and other loose chattels but remain blissfully unaware of the inherent fixtures within commercial property which may also be claimed if the work is undertaken by a specialist surveyor preferably with tax qualifications.
6) "I can do this myself"
Lastly and this is always well intentioned, we know of accountants who make the effort and do undertake a capital allowances exercise themselves especially where the nature of the expenditure on a property or refurbishment has been fully broken down in a schedule of rates or bills of quantity. In these cases accountants have shown that where they make the effort they have been able to identify a relatively high percentage of the capital allowances that were allowable. Unfortunately we also know of cases where they have claimed a very low percentage of the total capital allowances available or claimed for things which were not allowable at all.
A good example of this is where an accountant had a client with a large hotel costing £5m. The accountancy firm calculated that the capital allowances available to be claimed were in the region of £1m but when they commissioned a capital allowances expert to carry out the work found out there were over £2m of capital allowances which were claimable.
I hope that the above does not come across as being too cynical as we speak to accountants on a weekly basis who are busy trying to extract as much value for their clients as possible. However with the HMRCs latest consultation on capital allowances legislation likely to limit what can be achieved in the future in terms of retrospective claims, many owners of commercial property will have missed the capital allowances boat and I believe the blame for this will lie firmly with their professional advisers.
Curtis Plumstone Associates
We have now been living with the full capital allowances rules introduced by FA2012 for over a year so I thought it might be interesting to look at a recent case study. This case study highlights how our work has changed and also the invaluable role of the accountant in advising their client.
Capital Allowances - Please Can You Help?
I really should be starting 2015 in a more positive frame of mind but there is a large (ish) cloud on the horizon for capital allowances claims specialists everywhere.
Capital Allowances - The New Rules - A Mistake in Point!
Case Study - The Importance of Correctly Completing Section 198 Tax Election Agreements in Commercial Property Transactions
Purchase of Doctors Surgery for £1m
I would like to say that I never tire of writing about capital allowances claims on commercial property but to be honest that would be a lie.
I recently employed the services of a marketing company to help us create some more business for our capital allowances services.