Capitus has been specialising in capital allowances for fifteen years and the Directors of the company for a further ten.
During that time, it has never ceased to amaze us just how few professional property investors actively consider the issue of capital allowances in respect of the assets they are purchasing. When one considers that up to 40% of the cost of a property (and sometimes more) could qualify for tax relief and also the fact that all of that tax relief could be relinquished if not actively considered in the transaction process, this is, to say the least, surprising.
However, in attempting to understand why this should be so, it is perhaps not as surprising as it may first seem. The client investor is focused on potential yield and capital growth as is his investment agent. The investor assumes that his property lawyer or accountant will deal with all tax-related matters but neither of these professionals deal with the nuances of the very complex capital allowances legislation on a daily basis. The result is that opportunities to secure maximum tax relief or increased capital value on these transactions can often slip between two stones.
With the introduction of Finance Act 2012 and far reaching changes to the way in which capital allowances are passed between seller and buyer, this situation is going to get far worse. From April 2014, it really is an “all or nothing, use it or lose it” situation.
We cannot recommend strongly enough engaging a professional and experienced capital allowances consultant to act as an integral part of the transaction team and of course, we believe that no consultant is more professional or experienced than ourselves.
Property investors may be wondering if incurring another professional fee is really necessary given the range of unavoidable fees that they already have to incur on a typical property transaction. However, unlike other fees, our fee is a totally added-value service and represents only a very small fraction of the tax savings generated. With potentially huge amounts of tax relief now at risk, the question should not be “can we afford to engage the services of a capital allowances consultant?” It should be “can we really afford not to?”