Three of the lesser spotted announcements in the documents released with the 2011 Budget concern capital allowances and could have a major impact from 2012 onwards.
Time limit on capital allowance claims
Further to the announcement in the March 2011 Budget the Government issued a consultation document on 31 May regarding claiming capital allowances on fixtures in commercial property. Currently there is no time limit over which expenditure can be claimed. Whilst it is only possible to amend claims going back two years, it is currently possible to amend the claim say for the year ended 31 December 2009 based on new information about expenditure in 1999.
The consultation document has suggested that from April 2012 purchasers and sellers of a building will have a fairly short time window to agree the value of fixtures that will qualify for capital allowances. It will be necessary to make a return to HM Revenue & Customs (HMRC) of the agreed value. It is likely that the window will be either one year or two years from the date of purchase.
The consultation document was undecided on what will happen to historic expenditure, i.e. that which has occurred before April 2011. Once the legislation is finalised it may be that owners of commercial property will only have until April 2012 to claim tax relief on historic expenditure that may not have been subject to a detailed review.
It might be that you bought or developed a property several years ago and a detailed review of expenditure was not carried out at the time. If you think you might fall into this category please let us know. The amount of tax relief available will depend on the type of property and could be as high as 25% of the purchase or development price.
Abolition of Land Remediation Relief (LRR) and Flat Conversion Allowances (FCAs)
Following a review by the Office of Tax Simplification the Government has announced that it is considering abolishing various tax reliefs including flat conversion allowances and land remediation relief, although probably not until 2013.
Flat conversion allowances (FCAs) provide 100% tax relief on qualifying expenditure in converting unused or underused space above commercial premises into flats. The flats must be available for short-term letting in order to qualify for FCAs. The property in which the flats are situated must have been built before 1980. Please let us know if you would like further details on FCAs.
Land Remediation Relief (LRR) applies to companies only and is a much under utilised relief. Nevertheless it has brought significant tax breaks to a relatively small number of companies.
If your company has a major interest (freehold or a lease of at least seven years) in land or a building that is contaminated by harmful substances that were there when it was purchased then your company could be eligible for 150% tax relief on qualifying remediation expenditure. There is a tax credit available for loss making companies equivalent to 24% of qualifying expenditure. Similarly if a company brings land back into use that has been derelict since April 1998 then the same tax reliefs apply on certain qualifying costs. If you think your company might be eligible please let us know. Unfortunately LRR does not apply to nuclear decontamination.
Act now before these tax reliefs are abolished!
If you like this article and would like to subscribe to INSPIRED, our FREE monthly newsletter, then please click SUBSCRIBE.Subscribe