Capital allowance claims serve as a significant relief for businesses, enabling them to deduct the costs of certain business assets from their taxable profits. However, with potentially large financial implications on the line, these claims are far from straightforward.
In Capital Allowances for Investment Property Purchases, Phillip O’Connor delves into the practical difficulties that companies face when filing capital allowance claims and outlines what successful claims entail.
Practical Challenges
The job of lodging a capital allowance claim is akin to navigating a labyrinth; it requires a diverse blend of skills and expertise often housed within different professional worlds. Tax, surveying, and property proficiencies must converge for a precise and lucrative claim. A primary hurdle is the lack of awareness and disconnect that exists between tax advisers and property or construction professionals. This chasm in understanding often results in claims that ether remain untouched, like treasure at the bottom of the sea, or ones that cripple under their own insufficiency.
Typically, the responsibility of these claims is placed in the hands of an accountant or tax adviser. From this purview, there emerge several paths of action:
The risky route of inaction or personal judgement without thorough knowledge, akin to an explorer deciding to wander a path blindfolded.
The methodical approach of appointing relevant experts and constructing a claim piece by piece – a workable strategy but one also fraught with inefficiencies.
Opting for the wisdom of specialists, such as Big 4 firms or bespoke consultancies, who boast credentials as SCSI/RICS Chartered Taxation Surveyors and the dual know-how of tax advice and chartered surveying.
It is worth noting the RICS's delineation that only those adorned with the Chartered Taxation Surveyor mantle should venture into providing capital allowances services, steering the ship away from Valuation Surveyors, Quantity Surveyors, and other similar professions.
Blueprint for Successful Claims
What do successful capital allowance claims have in common? They all begin with assembling the correct squad of professionals, armed not just with accounting and tax know-how, but also with a deep-rooted understanding of capital allowances legislation, case law, construction costing, procurement, the complexities of building systems, and the acumen to interpret the legal texts governing construction and property.
A successfully navigated claim explores the entitlement area thoroughly, almost like a detective looking for clues, before even attempting to attach a figure to the purchase claims. It stands strong on robust, defensible, and comprehensive justifications backed by an archive of supporting documentation. A vital component of a successful claim is its ability to foresee and prevent unfavourable repercussions for the taxpayer—after all, erring here can result in more than just a slap on the wrist from Revenue.
In essence, a claim isn't really a number—it's a story. A narrative built on detailed information, technical data, and a clear, lawful trajectory that articulates why these capital allowances are rightfully claimed. It takes skill, collaboration, and attuned attention to detail.
To stay upright on the tightrope of capital allowance claims, businesses must keenly understand these challenges and equip themselves with the required calibre of professional guidance that ensures their journey is neither plagued by missed opportunities nor hampered by overzealous mistakes. As the stakes are high, so must be the standard of effort and expertise invested in the process.
For any organisation seeking to make headway with capital allowances, they must remember that triumph lies in the junction of precision, prudence, and professional proficiency. And sometimes, the most valuable asset in this mix is the wisdom to call upon the right allies.
For the full session, please click here.
In this course, Philip O’Connor covers the following topics,
- Capital allowances overview
- The value of capital allowances claims for property purchases (including case studies)
- Legislation and Revenue guidance relating to claims
- Best practice in the preparation and quantification of purchase claims
- The key to successful claims
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.
