THE INFLUENCE OF ENHANCED CAPITAL ALLOWANCES

The influence of enhanced capital allowances on choice of replacement assets

Table of Contents

Introduction3

Discussion3

Enhanced Capital Allowance5

Qualifying equipment5

The Energy Technology List5

The claim8

The amount to claim9

Leasing10

Open to all11

Conclusion15

Bibliography17

The influence of enhanced capital allowances on choice of replacement assets

Introduction

The Capital Allowances issues facing the property professional on property refurbishments will depend largely on the role of the property professional. This general guide segregates the property professionals into four basic types as follows:

Investment surveyor

Construction consultant

Property solicitor

Accountant and tax agent

Discussion

Gordon Brown likes to use the tax system to make the world a better place. One of his aims is to encourage businesses to be more energy efficient using the old carrot and stick routine. The Climate Change Levy is definitely a tax stick imposing an additional charge on business users of most types of energy as explained in Allison Plager's article 'Climate Change Levy: Steam Heat' in Taxation, 7 September 2000 at page 593, while Enhanced Capital Allowances are the less well known carrot.

Any company or individual incurring capital expenditure on the construction or acquisition of real estate assets and who can utilise capital allowances to minimise the tax that they pay. We can also act for accountants who require our services to analyse such expenditure on behalf of their clients .

This is the preparation of claims for capital allowances in respect of expenditure incurred on the acquisition or construction of real estate assets. The claim is prepared in a format which satisfies the disclosure requirements of the self assessment regime either for companies or individuals, which takes account of all HMRC current practice and interpretation and which above all ensures that the taxpayer's claim for capital allowances is maximised. The claim can be appended to the year-end tax computations prepared by tax payers, accountants or professional advisors and are reconciled to the taxpayer's statutory accounts, thereby ensuring that all available tax relief has been identified in any particular financial year .

The Capitus approach to capital allowances claim preparation differs from that approach used by accountants because the professionals employed by Capitus have experience and skills not only in tax legislation relating to capital allowances but also in property. Accountants who specialise in tax do not usually specialise in capital allowances and so they engage the services of quantity surveyors who are not skilled in the relevant tax legislation to carry out analyses of construction cost information to identify assets qualifying for tax relief. This usually results in either significant under-claims, or worse still, inaccurate over-claims .

Furthermore, the traditional approach to claim preparation employed by accountants is usually undertaken at the financial year-end whereas Capitus becomes involved right at the outset of a construction project or property acquisition which means that they can significantly influence the levels of capital allowances available .

Enhanced Capital Allowance

Enhanced capital allowances are 100 per cent first year allowances given on the purchase of qualifying plant or machinery. The scheme was introduced by section 65 and schedule 17 of the Finance Act 2001, and has recently ...