URGENT  EARLY  WARNING RETROSPECTIVE  CAPITAL  ALLOWANCE  CLAIMS WILL  SOON  BE  TIME-BARRED

Buried within the 240 pages of the HM Revenue & Customs “Overview of Tax Legislation & Rates” dated 23.03.2011 (Budget Day) we have discovered the following little bombshell, which has very large and negative consequences:-

Paragraph 3.59 Capital Allowances:- Fixtures Mandatory Pooling

“The Government will consult on plans to introduce changes to the capital allowances Fixtures rules that businesses must pool their expenditure on Fixtures in a building within a short period of acquiring the building, in order to qualify for capital allowances.  A consultation document will be published at the end of May.”

At this stage we have no knowledge of what the Revenue believe to be “a short period” but it seems logical that they will start the ball rolling at two years (being the normal CT/600 amendment window); if so it will be the duty of every tax advisor to write and try to have the proposed time-bar extended (at least in the initial years).

Based on experience to date of such “HMR&C – Consultative Documents” we must assume that legislation will be introduced to limit retrospective capital allowance claims, probably from April 2012 (possibly earlier) – the unknown factor being what will the time limit be – and this is likely to be the only negotiable point in the Consultation.

There will be some tax advisors who read the above and say – “so what” – well here is a “what”  – Once a specific time-bar is in place if the advisor has failed to advise their client (in writing) of the implications, prior to the legislation becoming operative, then they face a very real possibility of a Professional Negligence Claim being made against them, if that client could have had a potential retrospective capital allowance claim outside of that time-bar.

The moral is you have been warned – now is the time to be checking all of your client files to see if they hold substantial freehold / long leasehold properties or indeed capitalized tenant’s improvements, which may well contain embedded Fixtures within the building, that could qualify for a retrospective capital allowance claim.

It should be noted that Contracts of Purchase often refer to an inventory of – Fixtures & Fittings / Chattles / Plant & Machinery – which will usually have been brought into the purchaser’s computation as an opening capital allowance pool balance but, it is much rarer to find reference to Fixtures within the contract, especially in the absence of a Section 198 CCA 2001 Election. In such cases it will usually require the expertise of a proven, specialist, capital allowance company to identify and value the embedded qualifying fixtures – we are that company.

This limit has largely gone unnoticed by many, and will almost certainly see many claimants who were originally entitled to take advantage of  these lucrative tax benefits missing out.  Salmon Business Group are now strongly urging everyone who we have already contacted regarding their claim to really sit up and take action NOW, or stand to lose £1000’s in tax rebates.

For further information regarding your Capital Allowance claim, please contact one of our Capital Allowance specialists to get your claim underway.

Telephone us now on 0114 293011, Alternatively email us on sales@salmon-business.com