Capital Allowances

Transcription

Capital Allowances
Capital Allowances
2015
Welcome to the latest issue of the Savills Capital Allowances Consultancy Newsletter
I am pleased to report another good year for our specialist Capital Allowances Consultancy
practice in 2014.
Both the London and regional businesses were busy providing our services across the UK
and performed strongly due to increased demand from both clients and intermediaries.
Once again many thanks for your continued business and loyalty. We look forward to maintaining
our existing relationships and continuing to provide our services as the market continues to adapt
to the recent changes in both capital allowances legislation and working practice.
Neil Farquhar
National Director
Head of Capital Allowances
nfarquhar@savills.com
020 7409 8968
33 Margaret Street
London W1G 0JD
2015 Seminars
Due to the continued interest in
our technical capital allowances
seminars, our intention this year is to
expand them again to both London
and our regional offices.
Seminars will be held in our London
headquarters as well as regionally in:
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Cardiff
Bristol
Birmingham
Manchester
Our aim as ever is to pass on the
benefit of our recent experience
concisely and we look forward to
seeing you for a brief presentation
followed by questions over
breakfast.
Outlook for 2015
The complexities of the new fixtures rules,
combined with client awareness of the importance
of capital allowances on all commercial property
transactions and construction projects, will result
in greater demand for our services in 2015.
Our national framework is well placed to service
all our clients and intermediaries as market
conditions continue to improve.
Key opportunities in 2015 will be as follows:
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Greater scrutiny from HMRC / VOA on all capital
allowances matters now requires greater clarity when
submitting valuations and claims. Managing this risk
will be fundamental for both compliance and claim
agreement purposes with the UK tax authorities.
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Capital allowances valuation best practice is now
more forensic in nature. Detailed understanding of
how a building has changed over time is now critical
for correct advice to be given. The need for attention
to detail has never been greater.
Please select your preferred date by
following the link in the email.
As anticipated the 2015 Budget was
low on capital allowances content.
That said there are some changes:
JJ Stay of execution on AIA
threshold reduction
JJ Enterprise Zone changes
JJ Expansion to Enhanced Capital
Allowances
JJ Anti-avoidance measures on
both sale and leaseback and
connected parties transactions
All changes to capital allowances in
the 2015 Budget will be covered in
the seminar programme.
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Growing capital allowances compliance requirements
for both Buyers and Sellers in all commercial property
transactions. Greater focus is now required at due
diligence stage because capital allowances are now
central to these transactions.
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Greater expected demand for our services across
the UK means that meeting client deadlines, both for
tax filing purposes and deal purposes will be more
challenging than ever.
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Our intermediary referral network continues to grow
and this will expand in 2015, particularly within the
legal profession where our specialist input is now an
integral part of the transaction due diligence process.
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Increased awareness and the nature of the legislative
changes has inevitably led to legal disputes. The RICS
approached Savills last year to act as their Expert
Witness in this specialist field and we see this role
increasing in 2015.
Hopefully these points together with the below
gives a snapshot of both the opportunities and
challenges within our specialist practice in 2015.
I look forward to seeing you at one for our seminars
and catching up over a coffee in due course!
Contributor – Neil Farquhar,
Head of Department
Capital Allowances Practice –
The New Normal
As we approach the anniversary of the full
implementation of the new fixtures rules back in
April 2014, it is worthwhile to take stock of the
resultant changes in practice we have observed
over the past year.
Whilst more people say they have heard
about the new rules, there is still a lack of
understanding of what they entail and how
they apply. We want to work closer with clients,
advisors and intermediaries to bridge this gap.
Some common misconceptions persist,
despite our continued efforts to dispel them:
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The new rules do not remove the ability to
retrospectively value unclaimed allowances
on historic property expenditure.
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In most cases, properties bought from developer
traders or those outside the charge to tax are not
caught by the new rules. Purchasers can inadvertently
lose out, as our recent experience in Bristol
demonstrates (see South West Region Update).
In terms of practice, key observations include:
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Continued prevalence of ‘pay-to-pool’ arrangements
– We are engaged by purchasers to value all
unclaimed allowances on the seller’s behalf in order
to meet the pooling and fixed value requirements.
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Shift in Revenue practice – The new normal appears
to be that capital allowances valuations will be
enquired into and scrutinised in greater detail
by both HMRC and VOA.
It is evident from the changes that we are in a
new era of capital allowances practice. This year’s
seminar programme seeks to address the issues
and ensure attendees are sufficiently informed to
deal with them.
Contributor – Terence Tan,
London & South East Region
Capital Allowances
2015
Eastern Region Business Update
The eastern regional business has enjoyed a fifth year of continued
success with an increasing level of instructions from both new and
existing clients. We anticipate another promising year ahead as
the localised economic outlook continues to improve and market
knowledge of how we can add real value grows.
Historically, the Eastern business has enjoyed particular success in
the Care Home sector, although this year saw an increased demand
for our services within the industrial and office property sectors. This
is due to improved investment conditions and increasing awareness
of the new fixtures regime - capital allowances are an integral part
of every commercial property transaction which can no longer be
ignored.
A particular success story for the Eastern business last year
involved valuing one of the regions foremost entertainment venues,
comprising 7 function rooms, 5 bars, 2 restaurants and a large
bowling centre. Purchased several years ago and subject to
subsequent refurbishment and fit-out works, the initial view of the
client and their accountant was that all possible capital allowances
had already been claimed.
Despite the challenge of scarcity of information, our highly forensic
approach meant that we were able to utilise alternative sources
to establish the basis for a comprehensive capital allowances
valuation. We identified total additional capital allowances of
approximately £1.6m on both the original purchase and subsequent
capital expenditure, resulting in additional tax savings available to
the client over a number of years, over and above what had already
been claimed.
Contributor – Kamala Singh,
Eastern Region
RICS preferred Expert Witness in the field of Capital Allowances
Savills is now appointed as the RICS preferred capital allowances expert witness. Our latest case
involved a capital allowances advisor who had prepared poor quality capital allowances valuations
resulting in a fee dispute. They took the client to court under breach of contract when he refused to
pay the fees. Savills were appointed as the capital allowances expert to review and comment on the
valuations completed and the general work carried out.
With the advent of the new capital allowances fixtures regime, advisors are increasingly seeking capital
allowances advice from self-proclaimed ‘capital allowances specialists’. However, the pitfalls of outsourcing
to poor quality advisors are evident. Where capital allowances are inadequately valued, normally on the
incorrect technical basis, legal actions may arise between a client and their advisor or intermediary.
Where capital allowances are overvalued, there is a risk of solicitors being sued. Where capital
allowances are undervalued by the seller, the buyer can take them to tribunal. This recent dispute
highlights the need for comprehensive advice at the right time!
Contributor – Neil Farquhar,
Head of Department
Case Study – BUYER BEWARE!
In 2014 Savills Capital Allowances was instructed on a £1.6 billion acquisition of 11 properties of the More London portfolio by the real
estate arm of the State of Kuwait. The work undertaken involved the negotiation and preparation of capital allowances contract clauses
and capital allowances elections to ensure that the remaining capital allowances were preserved for the Buyer’s use in light of the new
fixtures rules. Savills were able to identify many millions of unclaimed capital allowances, which the Buyer was unaware of prior to our
involvement and comprehensive due diligence.
Contributor – Kamala Singh,
London & South East Region
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Capital Allowances
2015
South West Region Update
Markets continue to see positive growth
in commercial sectors both in town and
out of town areas within the South West,
with a demand for both existing stock as
well as new developments. Within the last
12 months, we have seen both our local
South West and national clients looking to
invest within the area due to increasing local
demand for quality property yielding good
returns.
Whilst the markets in Bristol and Cardiff
remain very strong, our South West team
has prepared valuations for a wide range of
clients including hotels, offices, high street
retail, pubs and bars and business centres
throughout Cornwall, Devon and Somerset,
including in Newquay, Torbay, Swindon and
Taunton.
We are increasingly meeting new clients
who, due to poor advice, have unfortunately
missed out on significant amounts of capital
allowances on their property investments. In
some cases, they have missed out on the
opportunity altogether.
One project of note was with an existing
client who acquired a well-rented office
located in central Bristol and was advised
by both his lawyer and agent no capital
allowances were available.
Following a thorough review by our Bristol
team and a detailed site inspection, we
identified unclaimed integral features,
reversionary tenant fixtures and additional
plant and machinery assets outside of an
inherited capital allowances election. In total
we identified more than £500,000 worth of
capital allowances, saving the client more
than £100,000 of tax on rental profits.
Against the backdrop of the new fixtures
rules and the level of scrutiny that capital
allowances claims are now looked at, a
specialist must be appointed who has both
good local knowledge and an excellent
track record with HMRC / VOA in order to
achieve the best level of recovery.
If you are buying, selling or improving your
property, I would recommend getting in
touch before the transactions occur to
ensure the capital allowances are correctly
dealt with and the position is agreed during
due diligence.
Contributor – Alex Kramarenko,
South West Region
Our Intermediary Referral Network
2014 saw the business referred from third party accountants, IFA’s
and tax advisors go from strength to strength. An influx of new
accounting firms and financial advisors have introduced their clients
to Savills. As discussed above the new fixtures rules have pushed
capital allowances up the agenda. Many general accountants and
tax advisors recognise the specialist nature of the capital allowances
work we undertake and are keen to secure the maximum tax relief
possible for their clients.
In 2015 Savills Capital Allowances Consultancy is expanding its
support to solicitors as the practicalities of the new fixtures rules
develop. We have been invited by the Solicitors Group to present at
a series of CPD sessions around the country; we have already been
to Birmingham in March 2015 and are due to present at Gateshead
(29 April), Southampton (21 May) and Bristol (3 June).
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This is because we are noticing a greater concern amongst
professional advisors with regards to protecting the capital
allowances they have advised upon and avoiding being sued in the
event of a failure to claim.
A recent example was where an administrator contacted us as they
were about to exchange contracts on a £12m hotel disposal. Savills
Capital Allowances Consultancy were able to amend the sale and
purchase agreement to compel the seller to ‘pool’ the allowances
and transfer them to the buyer. This resulted in circa £9m of
allowances being available to the buyer that otherwise would have
been lost.
Contributor – Michael Brownsdon,
London & South East Region
Capital Allowances
2015
Capital Allowances Consultancy - Our National Framework
London & South East
Neil Farquhar
National Director
Head of Department
nfarquhar@savills.com
+44 (0) 20 7409 8968
Terence Tan
Director
ttan@savills.com
+44 (0) 20 7409 8904
Michael Brownsdon
Associate Director
mbrownsdon@savills.com
+44 (0) 20 7409 9952
Kamala Singh
Associate
ksingh@savills.com
+44 (0) 20 7877 4576
London & South West
Leeds
Neil Farquhar
Manchester
National Director
Head of Department
nfarquhar@savills.com
+44 (0) 20 7409 8968
Birmingham
Eastern
Cambridge
Kamala Singh
Associate
ksingh@savills.com
+44 (0) 20 7877 4576
Cardiff
Midlands & North
Bristol
London
Southampton
Nav Lalli
Associate
nlalli@savills.com
+44 (0) 121 634 8457
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