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Do you file Plant and Machinery Capital Allowances claims for your clients?

Do you file Plant and Machinery Capital...

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We hear a lot of noise from various providers of Plant and Machinery Capital Allowances claims services that accountants are 'not aware' of the Capital Allowances that could be available to their clients to claim, or that it's an area that is just too complex for them to bother with. 

What I would like to know is what accountants actually think about this area?  Do you make these claims for your clients?  Do you refer them to a third party provider?  What would guide your choice of such a provider? 

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By johngroganjga
10th Jan 2014 11:35

The issue is assets embedded in building purchases that may be eligible for capital allowances as plant, whereas the purchase of the building itself will attract no allowances.  The noisy capital allowance consultants allege that without their expert services many accountants would fail to identify plant items included in building purchases, and therefore miss out on potential CA claims for their clients.

I am not aware of any general issue with capital allowance claim on assets bought separately from buildings and I do not think anyone is really suggesting that accountants systematically fail to claim capital allowances in such cases.

So in my opinion the issue, and the topic for debate, is much narrower than your question implies.  It is not capital allowance claims generally but the specific area of claims in relation to assets embedded in building purchases.     

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Replying to jcace:
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By WordSmith1
10th Jan 2014 11:48

Thanks for the clarification

Yes that is what I was really driving at.  Even the loudest of the specialised firms in the marketplace will concede that an accountant will as a matter of course claim the CA on assets purchased separately from buildings.

That now being clarified, the question stands - is it true that accountants do not routinely make claims in relation to assets embedded in building purchases?

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By raychidell
10th Jan 2014 12:14

Advisers

I agree with Johngroganjga that the issue is narrower than the question implies. It is undoubtedly the case that some substantial claims for capital allowances have been missed over the years, but these relate overwhelmingly to fixtures in commercial property.

If a new property is built, or an existing property is extended, the build costs will be shown in the accounts as “additions to property” or similar, and the fit-out costs will be shown as “fixtures and fittings”. It definitely does happen that in some cases CAs are then claimed only on the latter category, even though many qualifying costs are included in the former (e.g. general electrics and plumbing systems, to give two simple examples). Any accountant who is familiar with the case law definitions of plant and machinery, and with the various statutory complications and restrictions, should be in a position to carry out the necessary analysis work.

Where property is bought from a third party, the issues are much more complex, especially if there have been numerous past owners. A detailed knowledge of the relevant sections of CAA 2001 (i.e. Part 2, Chapter 14) is needed if the correct tax outcome is to be reached. Furthermore, a property valuation is often needed, which is something that most accountants are not qualified to provide. In practice, the sale and purchase transaction is subject to great time pressures and the CAs issues have often simply been overlooked. The changes introduced in FA 2012, effective partly from April 2012 and partly from April 2014, will mean that in future the issues have to be properly addressed.

As for the specialist industry that has sprouted up, I think the same principles should be applied here as with any other specialist consultant to whom we might turn, or to whom we might refer clients. What is their track record? What professional qualifications to they have? In what other ways can they demonstrate their expertise? There are some CAs specialists out there who are very well qualified in both tax and valuation matters. There are others who have undertaken no serious tax training at all, and who know far less about the capital allowances rules than any qualified accountant, but who are using a dangerously formulaic approach to a complex issue. Some fairly hard-hitting technical probing will usually help to get behind the slick marketing to discover what real expertise is there.

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By Duhamel
10th Jan 2014 14:02

Embedded assets

When I prepare a tax return I will check the assets of whatever entity it is. If there is a factory on the balance sheet for £400k then I will ask if any claim has already been made. If one hasn't then the tax partner will contact the client.

If the premises are an office for £120k, then a claim may not be worthwhile.

I don't agree with these providers claims that accountants are not aware of the potential P&M claims on buildings. Most accountants would already be on top of this area and have made a claim long ago if it was worthwhile and the client agreed, unless the buildings are new.

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