We’ve been closely monitoring the effect of the implementation of the 2012 Finance Bill on capital allowances claims this year and, as predicted, we’re seeing the worst-case scenario unfolding.
Essentially the changes in regulation stipulated that any individual or business owning a commercial property has to identify the capital allowances in their commercial property at the point of being bought or sold, or they could be lost permanently.
To date, Britain’s commercial property owners, or more specifically their representatives, seem completely unaware of this and as a result are losing a vast amount of money in tax relief month after month. In the first financial quarter of 2014, we believe that as little as 1 per cent of eligible commercial properties have had tax relief claimed against them. Based on conservative figures, we estimate this to equate to losses somewhere in the region of £100m.
The Finance Bill is somewhat of a quagmire, containing several intricate complexities, hence it’s not surprising that many of the parties involved in commercial property transactions are struggling to get their heads around the changes. Consequently, the amount of tax relief being lost will grow with each passing quarter.
We are also concerned that what we are seeing is the tip of an iceberg that could quickly reach melting point, leading to accusations of negligence, followed by complex and protracted legal proceedings as the situation gets out of control and more and more property owners discover that they could be missing out on a serious amount of money.
There is no doubt in my mind that anybody involved in selling a commercial property should look to appoint a capital allowances specialist as quickly as possible.
In fact, the CPSE.1 (v3.3) document (Commercial Property Standard Enquiries), covering pre-contract enquiries for all commercial property transactions, has recently been updated, with section 32.10 specifically requesting that a capital allowances adviser be nominated. All commercial property buyers should ensure that this is completed accurately to avoid implications in the future.