Haulage and warehousing companies normally own hugely valuable commercial premises but these firms are often shocked to discover they can be worth even more than they think.
The industry is missing out on tens of millions of pounds of government tax relief because companies are underclaiming on a key tax benefit known as Capital Allowances (CAs), business tax relief consultants Catax warn.
The Capital Allowances legislation operated by HMRC is the most relevant form of tax relief offered to owners of commercial property. But many company managers, and their advisers, remain unaware of what’s really at stake — in fact the average claim is worth £52,000.
So what are Capital Allowances?
Capital Allowances (CAs) are a form of tax relief that relate to physical assets. They allow a company to offset its Corporation Tax bill against all the expenses associated with a commercial property.
Most commercial properties will house the basics such as electrics, lighting, heating, air conditioning and security systems. However some industries require more plant and machinery and that, in turn, translates into larger Capital Allowances benefits.
A large warehouse could have all the above and more. The addition of radiant heating, a sprinkler system, roof smoke ventilation systems and dock levellers will all qualify, raising the value of claims.
Some haulage firms won’t have built some of their premises but will have bought them. Capital Allowances apply to them too. In fact, previous owners of commercial property may have also been prevented from claiming Capital Allowances themselves, and this could mean the current owners could claim even more than they expect. It doesn’t matter if the purchasing company didn’t install all of the qualifying installations and equipment itself.
There may be a number of reasons why a previous owner did not make a CA claim — most likely they were either a non-taxpaying entity (e.g. a charity, local council or pension fund) or were not carrying out qualifying activity at the premises (e.g. a developer).
Since 2014, new requirements mean purchasers of commercial property need to be careful to ensure vendors sign elections concerning past Capital Allowances claims in order to transfer the value of any unclaimed allowances to the new owner. You must do this within two years, so if you’re not sure whether this was carried out, it’s important to get professional advice as soon as possible. If a company has bought a new build property then there cannot be any past owners as developers are prevented from claiming, so that makes a CA claim a dead certainty.
The haulage and storage industry is a rich source of Capital Allowances claims, but not all businesses are making the most of it. We regularly come across firms that aren’t using this tax relief at all, which is remarkable. Claims are time limited by the government so once you’ve lost them, they’re gone for good. It’s a complex area so you can’t just rely on generalist accountants to understand how to get the most out of the scheme.
Richard Armstrong, Partnerships Director, Catax
The distribution centre
Qualifying expenditure = Over £1.4m
Client benefit = £122,000
A company that bought a new build distribution centre for £4.7m received £122,000 in Capital Allowances after our surveyors identified over £1.4m of qualifying expenditure. Qualifying expenses included water, drainage, communication, security, mechanical and electrical installations.
The warehouse operator
Qualifying expenditure = £260k
Client benefit = £98k
A business that constructed additional warehouse space at commercial premises rented to a book wholesaler received £98,000 in Capital Allowances after we identified £260,000 of qualifying expenditure. This included construction costs as well as water, mechanical and communications installations.