Tax threat to property sale values looms
Tax threat to property sale values looms
London, 10 September 2013 – Businesses across the UK are losing out on millions of pounds in unclaimed property allowances and run the risk of significantly reducing the value of their premises as new tax rules bite.
Changes in the Finance Act that come into effect in April 2014, and a tougher line by HMRC under new rules that apply when properties change hands, mean that tax allowances for commercial building fixtures could be lost to a new buyer and all future owners.
The warning comes from a senior tax consultant at global information services company Wolters Kluwer. According to Neil Tipping, Senior Tax Consultant at CCH (http://www.cch.co.uk), Wolters Kluwer’s global tax and accounting business: “It is no exaggeration to say that the vast majority of commercial properties have embedded fixtures for which their owners and accountants have never claimed tax relief.
“It may sound too good to be true, but our experience working with a range of businesses, and their financial and legal advisers, confirms the extent of the dormant tax benefit nestling in ‘integral features’ of buildings,” the Wolters Kluwer tax consultant explains.
The long and varied list of these embedded assets includes electrical and cold water systems, air conditioning, radiators, partitioning and external solar shading. Unless a company has already had its buildings and books reviewed by specialist surveyors and tax experts there are almost certainly unclaimed allowances available.
“From offices to factories, hotels to golf clubs and restaurants, capital allowances for integral features typically account for 10% to 30% or more of the purchase price of a property (Note 1). We have so far discovered millions of pounds of quantifiable expenditure,” Neil Tipping says.
“It is important to be aware that there is no time bar on how far back the search for relevant expenditure can go,” he adds.
HMRC does not have a problem with properly structured and researched capital allowance claims, but it has signalled a tougher line under new rules that apply when properties change hands. Capital allowances for fixtures could be lost to the buyer and all future owners, following the changes in the Finance Act 2012.
Since April 2012, property sellers who have claimed or intend to claim allowances for integral features must agree a fixed value for the transfer. And from April 2014, sellers who have not yet claimed must also ‘pool’ – though not necessarily claim – these allowances to keep them alive for future owners. In both cases there is a two-year window of opportunity and other conditions apply(Note 2).
These changes have far-reaching implications for property buyers – and also accountants, tax advisers, property agents and solicitors, Neil Tipping advises.
“Failure to identify hidden capital allowances could destroy value and significantly reduce the market valuation of properties. These changes complicate an aspect of capital allowances that was already shrouded in confusion, and they raise the stakes for all involved in commercial property,” the tax expert warns.
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Notes to Editors
1 – The value of unclaimed capital allowances depends on the nature of the building, its uses and other factors. A review by Wolters Kluwer’s CCH Capital Allowances Service for a hotelier with five small properties identified unclaimed capital allowances exceeding £900,000 – almost 40% of the portfolio’s acquisition cost. Practically all buildings will have embedded features that may warrant a claim.
2 - The parties have two years to apply to a tribunal to fix the disposal value of fixtures. This does not apply where the seller was a non-taxpayer. Purchasers may still be able to claim for certain items (e.g. general lighting and cold water systems) that fall outside the new rules because they were added to the definition of integral features after the seller acquired the property.
3 - CCH Capital Allowances Service employs property, tax and legal experts to find and quantify unclaimed allowances. Finding the embedded assets and conducting due diligence is a specialist task. The team works closely with clients’ accountants and advisors, assuming responsibility for surveying the property and preparing a full report for submission to the HMRC. CCH manages the entire process for a full 12 months after the claim has been submitted. The service has a 100% record defending these claims. No fee is charged where the client does not benefit.
Press enquiries - for more information please contact:
Head of Communications
Wolters Kluwer UK
Direct: 020 8247 1169
CCH (http://www.cch.co.uk), a Wolters Kluwer business, is the leading global provider of tax, accountancy and audit information, software and services. It has served tax, accountancy and business professionals since 1913. In the UK CCH provides books and online information, software, magazines, professional development and fee protection.
Wolters Kluwer (http://www.wolterskluwer.com) is a market-leading global information services company with annual revenues (2012) of €3.6 billion and maintains operations in over 40 countries across Europe, North America, Asia Pacific and Latin America. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.
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