Tax Incentives for Green Property Investment & Sustainable Development

Capital Allowances have always primarily been an incentive to encourage investment in either certain types of property (e.g. hotels) or particular types of assets within property (e.g. plant and machinery).

However as climate change and pressure to re-use existing land resources becomes increasingly important agendas for the UK Government, the emphasis of tax incentives for property has switched over the past number of years towards green and reusable forms of development.

Some of these incentives have been around for a number of years but taken in the context of additional measures announced in the March 2007 budget together they form a very attractive package of potential tax relief for investors in “Green” property.

Capitus New Guide

There is no single point of reference on this subject so we have compiled a new folder called “Tax Incentives for Sustainable Development and Urban Regeneration”. This collates all the existing measures and incentives available in the capital allowances area applicable to sustainable development and investments and also offers guides to help you fully take advantage of these tax-saving opportunities and maximise your claims.

If you would like more information on the folder or if you would like to receive a copy, you can either send an e-mail with your contact details to enquiries@capitus.co.uk or call us directly on 028 2564 7022.

You can find more information on each of the measures elsewhere on our website but they are summarised here for your convenience.

Enhanced Capital Allowances

Part of the Government’s response to carbon emission targets set out in the Kyoto protocol, ECAs were introduced as a 100% First Year Allowance for investment in qualifying energy-efficient plant or machinery. They are particularly valuable with the reduction in the plant and machinery writing down allowance (WDA) rate from 25% to a probable WDA of 10%. ECAs are also now available for investment in Water-Efficient Technologies.

Land Remediation Relief

LRR is a 150% tax allowance for expenditure incurred in bringing land in a contaminated state back into use for property development. The scheme itself is the subject of a consultation process at the moment but currently encompasses expenditure on such items as land previously contaminated by use as, for example, a petrol station or the removal of asbestos in existing buildings

Business Premises Renovation Allowance

Again this is a 100% FYA for expenditure incurred bringing disused buildings back into business use in “disadvantaged areas”. The building must have previously been used as a business premises and it must have been disused for a period of a year or more. A disadvantaged area is defined by reference to The Assisted Areas Order 2007 No 107 and to establish if a particular building is in a disadvantaged area, there is a DTI postcode-checking tool at www.dtistats.net/regional-aa/aa2007.asp

Flat Conversion Allowances

Aimed at injecting new life into towns and cities, this measure gives a 100% FYA against expenditure incurred converting vacant space above shops into residential property. The expenditure must be incurred on a “qualifying flat” in a “qualifying building” and the rules governing the definition of these terms are complex and restrictive. The intention is there nonetheless to encourage the re-use of previously vacant property for residential letting purposes.