Anyone currently looking to acquire commercial property assets are advised to seek professional capital allowances advice to avoid detrimental and potentially costly tax implications, according to CBRE. This follows a change in legislation from April 2014, when a two year window to claim these allowances will be introduced. Unless fully informed, new owners of commercial property could lose out on millions of pounds.
Currently there is no time limit during which capital allowances can be claimed on the acquisition of a property; but this will change next month, after which just two years are available in which to pool any qualifying expenditure.
If a property is purchased after 1 April (for corporation tax payers) or 6 April (for income tax payers), capital allowances must have been be pooled (either by the seller, or by the seller and the vendor electing to transfer the allowances at an agreed amount). If this is not done, the potential tax relief on this and all future transactions on the property may be lost.
Properties acquired from non-taxpaying entities such as pension funds will not be affected unless a previous tax paying entity held the asset after April 2014.
Commenting on the change, Graham Burrell, Head of Capital Allowances at CBRE said, “Although capital allowances are quite high on the pecking order of priorities when acquiring commercial property, their importance should ascend to arguably the most urgent, due to these changes. Inadequate advice during the due diligence stage could prove to be very costly for both parties.
“To put this into context, if you were to buy a commercial property in April 2014 for £100m (capital allowances worth £30m) and you fail to pool the allowances within the two year time frame, the £30m is lost forever. This applies not only for the investor, but also for any future purchasers of the property. This is of such magnitude that we could begin to see properties held by pensions funds become substantially more attractive to investors.”
Knowledge of this change in legislation effecting capital allowance is vital to anyone buying or selling a commercial property from April onwards. Both parties are strongly advised to seek advice at the earliest opportunity. A simple video guide to the change can be viewed on the CBRE website: http://www.cbretv.co.uk/in-the-news/property-industry-could-lose-thousands-under-change-of-tax-legislation.