Are you missing out on Qualifying Interest Relief?

If you pay interest on a personal loan then you used to lend money to your limited company then you can probably claim tax relief on the interest that you pay on your personal loan.

Here are the rules from HS340 – You may be able to claim relief for interest paid or for alternative finance payments where the loan or alternative finance arrangement is used to:

  • buy ordinary shares in, or lend money to, a close company in which you own more than 5% of the ordinary share capital on your own or with associates
  • buy ordinary shares in, or lend money to, a close company in which you own any part of the share capital and work for the greater part of your time in the management and conduct of the company’s business, or that of an associated company
  • acquire ordinary share capital in an employee controlled company if you are a full-time employee – we regard you as a full-time employee if you work for the greater part of your time as a director or employee of the company or of a subsidiary in which the company has an interest of 51% or more
  • acquire a share or shares in, or to lend money to, a co-operative which is used wholly and exclusively for the purposes of its business
  • acquire an interest in a trading or professional partnership (including a limited liability partnership constituted under the Limited Liability Partnership Act 2000, other than an investment limited liability partnership)
  • to provide a partnership, including an limited liability partnership, with funds by way of capital or premium or in advancing money, where the money contributed or advanced is used wholly for the partnership’s business – if the partnership is a property letting partnership, read information about the residential property finance costs restriction
  • buy equipment or machinery for use in your work for your employer, or by a partnership (unless you’ve already deducted the interest as a business expense) – relief is only available if you, or the partnership, were entitled to claim capital allowances on the item(s) in question – if the equipment or machinery was used only partly for your employment, or only partly for the partnership business, only the business proportion of the loan interest or alternative finance payments qualifies for relief)

You cannot claim relief for interest on overdrafts or credit cards.

The limit on Income Tax reliefs restricts the total amount of qualifying loan interest relief and certain other reliefs in each year to the greater of £50,000 and 25% of ‘adjusted total income’.

To claim the tax relief you enter the amount of interest paid on your self assessment return under Additional Information SA101 ‘Qualifying Loan Interest Paid in the Year’.

This could be useful for Property Investors who invest via a limited company. Here is an example

Fred Smith owns his own home worth £500k without a mortgage

He borrows 75% £375k against his home and lends it to his limited company, the interest rate from his broker is 2% cheaper than borrowing in his limited company.

So he could save £7,500 a year interest

He also gets tax relief on the interest that he has paid.

steve@bicknells.net

If you don’t charge a market property rent what expenses can you claim?

There may be times when a property owner decides not to charge a market rent or lets the property rent free. This will mean you will be restricted on the amount of expenses you can claim.

PIM2130 Properties not let at a commercial rent

Expenses incurred by a customer on a property occupied rent free by, for example, a relative are likely to be incurred for personal or philanthropic purposes – to provide that person with a home. The same applies where the property is let at less than a commercial rate or isn’t let on commercial terms.

Unless the landlord charges a full market rent for a property (and imposes normal market lease conditions) it is unlikely that the expenses of the property are incurred wholly and exclusively for business purposes (PIM2010). So, strictly, they can’t be deducted in arriving at rental business profits. However, if the customer lets a property below the market rate (as opposed to providing it rent-free), they can deduct the expenses of that property up to the rent they get from it. This means that the uncommercially let property produces neither a profit nor a loss, but the excess expenses cannot be carried forward to be used in a later year.

A relative or friend may ‘house sit’ between normal lettings on commercial terms. Provided the property is genuinely available for commercial letting and the landlord is actively seeking tenants they can deduct the expenditure incurred on that property in the normal way. 

PIM2010 – Property Income Manual – HMRC internal manual – GOV.UK (www.gov.uk) states

Wholly and exclusively rule                        

Most of the trading expenses rules are applied to property income (see PIM1100 onwards). This includes the ‘wholly and exclusively’ rule which says that expenses cannot be deducted unless they are incurred wholly and exclusively for business purposes.

Dual purpose expenditure

Strictly, if an expense is not wholly and exclusively for the purposes of the property business, it may not be deducted. In practice, though, some dual purpose expenses include an obvious part which is for the purposes of the business. We usually allow the deduction of a proportion of expenses like that. 

In summary – rent free or less than market value

  • Its unlikely that the expenses will be incurred wholly and exclusively for business purposes
  • Expenses not incurred for business expenses are excluded or restricted
  • Where a property is let below market rate, you can only deduct expenses up to the value of the rent received
  • You can not use rent free or less market rent to produce a loss for tax purposes. Any excess losses can not be offset against other rental profits or carried forward.

What about Covid?

  • Tenants should continue to pay rent and abide by all other terms of their tenancy agreement to the best of their ability. The government has made a strong package of financial support available to tenants, and where they can pay the rent as normal, they should do. Tenants who are unable to do so should speak to their landlord at the earliest opportunity.
  • In many, if not most cases, the COVID-19 outbreak will not affect tenants’ ability to pay rent. If a tenant’s ability to pay will be affected, it’s important that they have an early conversation with their landlord. Rent levels agreed in the tenancy agreement remain legally due and tenants should discuss with their landlord if they are in difficulty.

Guidance for landlords and tenants – GOV.UK (www.gov.uk)

steve@bicknells.net

How can you claim your £1,000 property allowance?

The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property.

If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income.

It was introduced in Finance Act (No2) 2017.

I have seen may tax payers use it incorrectly on their returns, putting in the allowance and claiming expenses, which is incorrect.

The property allowance applies to

  • UK and Overseas property businesses
  • Commercial and Residential Lettings

There are exclusions

  • Rent a Room – PIM4424
  • Individuals claim the Base Rate Finance Cost Allowance – PIM4460
  • Partnership Property – PIM4454

If your property income from UK and Overseas properties is less than £1,000 you will get full relief and don’t need to file a self assessment return.

If your income is over a £1,000 from UK and Overseas Property then you can choose whether its worthwhile, for example if your expenses exceed £1,000 you would not want to use the allowance as you can claim the actual expenses, there are some examples in PIM4482.

The Property Allowance can not create a property loss to carry forward.

If your property income exceeds £1,000 and you elect to use the Property Allowance, that would be ‘Partial Relief’.

You can choose to either deduct the £1,000 or the actual costs (this is bit I have seen incorrectly noted on tax returns, basically landlords have tried to claim both, which is not allowed)

You can decide on a year by year basis which is better – £1,000 or the actual costs.

Elections must be made by the 31st January following the tax year.

Here is an example from PIM4483

Stephanie computes partial relief as follows:

Step 1 – Calculate Total Receipts of the relevant property business:

The total receipts of the relevant property business is £1,200.

Step 2 – Subtract the Deductible Amount from Receipts:

The £1,000 allowance is subtracted from the total receipts for her property business. This leaves £200 (£1,200 – £1,000) of taxable profits for Stephanie’s property business.

The legal fees of £150 are not brought into account because you cannot claim both the property allowance and expenses.

There is further guidance at PIM4400

steve@bicknells.net

How can a developer buy a residential property SDLT free? Probate Relief

Stamp Duty (SDLT) can be expensive, normally a developer would have have to pay the extra 3% SDLT.

Acquisition by property trader from personal representatives

Finance Act 2003 (legislation.gov.uk)

3 (1) Where a dwelling is acquired by a property trader from the personal representatives
of a deceased individual, the acquisition is exempt from charge if the following
conditions are met.
(2) The conditions are—
(a) that the acquisition is made in the course of a business that consists of
or includes acquiring dwellings from personal representatives of deceased
individuals,
(b) that the deceased individual occupied the dwelling as his only or main
residence at some time in the period of two years ending with the date of
his death,
(c) that the property trader does not intend—
(i) to spend more than the permitted amount on refurbishment of the
dwelling, or
(ii) to grant a lease or licence of the dwelling, or
(iii) to permit any of its principals or employees (or any person connected
with any of its principals or employees) to occupy the dwelling, and
(d) that the area of land acquired does not exceed the permitted area

Meaning of “property trader”
8 (1) A “property trader” means—
(a) a company,
(b) a limited liability partnership, or
(c) a partnership whose members are all either companies or limited liability
partnerships

Meaning of “refurbishment” and “the permitted amount”
9 (1) “Refurbishment”of a dwelling means the carrying out of works that enhance or are
intended to enhance the value of the dwelling, but does not include—
(a) cleaning the dwelling, or
(b) works required solely for the purpose of ensuring that the dwelling meets
minimum safety standards.
(2) The “permitted amount”, in relation to the refurbishment of a dwelling, is—
(a) 10,000, or
(b) 5% of the consideration for the acquisition of the dwelling,
whichever is the greater, but subject to a maximum of £20,000.

This is also covered in SDLTM21040 – Stamp Duty Land Tax Manual – HMRC internal manual – GOV.UK (www.gov.uk)

This could be could be useful in the following circumstances

Property Flipping

Property Flipping is done when you buy a property do a small amount of work to it and then sell it for a profit.

Using this SDLT relief could significantly increase your profit.

Buy Refurbish Refinance Rent (BRRR)

This relief can only be used by a trading company, residential letting doesn’t count as trading. However, you could have a group of companies, one is a development company and one a residential investment company.

The development company buys the Probate Property and gets the relief.

Once its been refurbished the development company could sell the property or transfer it to the investment company.

Groups benefit from Group SDLT relief. Do you pay SDLT on Properties Transfers within a Group? – Steve J Bicknell Tel 01202 025252

steve@bicknells.net

Residential Letting – What is the Finance Cost Allowance and how are Unused Finance Costs used up?

This is often referred to clause 24 or section 24 relating to Finance Act 2015 (No 2) [Section 26 Finance Act 2016] that introduced the change which started from 6th April 2017. It took full force for the tax year 2020/21. The rules restrict interest relief to the basic rate of tax (20%).

The legislation was inserted into Income Tax (Trading and Other Income) Act 2005: Sections 272A, 272B and 274A-274C and Income Tax Act 2007: Sections 399A and 399B.

The legislation does not apply to Furnished Holiday Lets or Limited Companies.

Finance Costs include all finance costs, even those to buy furnishings and the incidental cost of arranging the finance.

The Relief

Its calculated as 20% of the lower of

  1. Finance costs not deducted from income, or
  2. The profits of the property business, or
  3. The adjusted total income

What is adjusted Total Income?

Net income is defined in the Income Tax Act 2007 Section 23

23 The calculation of income tax liability

To find the liability of a person (“the taxpayer”) to income tax for a tax year, take the following steps. Step 1

Identify the amounts of income on which the taxpayer is charged to income tax for the tax year.

The sum of those amounts is “total income”.

Each of those amounts is a “component” of total income.

Step 2

Deduct from the components the amount of any relief under a provision listed in relation to the taxpayer in section 24 to which the taxpayer is entitled for the tax year.

See [F1sections 24A and 25] for further provision about the deduction of those reliefs.

The sum of the amounts of the components left after this step is “net income”.

It excludes Saving and Dividend Income (ITA07/S18 (3) & (4)).

It excludes the personal allowance and blind persons allowance (ITA07/S23).

The end results is adjusted total income (ATI) – S274AA.

A tax reduction can not be used to create a tax refund but it can be carried forward.

Example 2020-21 onwards

Fred has

  • Employment Income £45,000
  • Residential Property Income £25,000
  • Mortgage Interest £10,000
  • Allowable expenses £5,000
  • Property Losses Carried Forward £15,500
  • Unused Finance Costs carried forward from 2019-20 £2,000

Calculation as follows

Employment Income£45,000
Property Income Calculation
Rental Income£25,000
Finance Costs – you can’t deduct Mortgage Interest£0
Allowable Expenses-£5,000
Property Business Profits£20,000
Less Property Losses Carried Forward-£15,500
Taxable Property Business Profits£4,500
Net Income – Employment and Property£49,500
Income Tax Calculation
Personal Allowance £12,500 at 0%
Basic Rate £37,000 at 20%£7,400
Higher Rate £0 at 40%
Income Tax Liability before Residential allowance£7,400

The Basic Rate Tax 20% reduction for Residential Property is the lower of

  1. Finance Costs not deducted in this case that’s £10,000 Mortgage and £2,000 Unused Finance Costs carried forward from 2019-20 which totals £12,000
  2. Property business profits which are £4,500
  3. Adjusted total income (exceeding personal allowance) £37,000 (£49,500 – £12,500)

The lowest amount is the

  • Property business profits which are £4,500
  • So the basic rate tax reduction is 20% x £4,500 = £900

    We can now deduct that from the £7,400, leaving £6,500 as the final income tax liability.

    Unused Finance Costs
    Residential Finance Costs£12,000
    Used in the Basic Rate Reduction-£4,500
    Unused Residential Finance Costs£7,500

    The Unused Residential Finance Cost is carried forward to the next tax year, in this example 2021-22.

    We repeat the calculations above in 2021-22, following all the same steps.

    Let’s assume in 2021-22 his net income from Employment and Property is £60,000

    The tax would be 0% x £12,570 plus 20% x £37,700 plus 40% x £9,730 = £11,432

    The Basic Rate Tax 20% reduction for Residential Property is the lower of

  • Finance Costs not deducted £10,000 Mortgage as in the previous year and £7,500
  • Unused Finance Costs = £17,500

  • Property business profits which are £20,000 (assuming its the same as the previous year – losses having been used up in the previous year)
  • Adjusted total income (exceeding personal allowance) £47,430 (£60,000 – £12,570)
  • The lowest is £17,500.

    So the basic rate deduction is £17,500 x 20% = £3,500

    £11,432 less £3,500 gives a final income tax liability of £7,932

    Unused Finance Costs
    Residential Finance Costs and carried forward amount£17,500
    Used in Basic Rate Reduction-£17,500
    Unused Residential Finance Costs to be Carried Forward£0

    steve@bicknells.net

    A Summary of Tax, Savings and Benefits of Electric Cars

    What is the plug-in grant?

    The plug-in grant has been around for several years as an incentive to purchase electric vehicles to curb climate change. The grant has been modified many times, but it currently offers £2,500 off of eligible low-emission cars and up to £16,000 for larger vehicles.

    You do not need to apply for the grant. The car dealer will include the grant in the vehicle’s price if it is eligible.

    • Cars: CO2 emissions of less than 50g/km and can travel at least 112km with zero emissions. The car must cost less than £35,000 and be on the list of government approved vehicles. The grant will pay for 35% of the car price up to £2,500.

    Grants for vehicle charging points

    In addition to the plug-in grant, you can also receive up to £350 towards the cost of a vehicle charging point. The Electric Vehicle Homecharge Scheme (EVHS) provides up to 75% of the installation cost on domestic properties in the UK.

    There is also the Workplace Charging Scheme (WCS) which is a voucher based scheme that provides support to businesses who install vehicle charging points.

    Both grants need to be applied for from the government’s website.

    HMRC Advisory Fuel Rate

    The advisory electricity rate for fully electric cars is 4p per mile.

    So you can claim 4p per mile for business miles in an electric car.

    Advisory fuel rates – GOV.UK (www.gov.uk)

    100% Capital Allowances

    Businesses of all sizes can claim 100% FYAs on capital expenditure on a car (CA23153) provided that:

    • the car is ‘unused and not second hand’, and is first registered on or after 17 April 2002;
    • it is an electric car or a car with qualifying CO2 emissions of not more than a specified amount;
    • the expenditure is incurred between 17 April 2002 and 31 March 2025; and
    • the expenditure is not excluded by the general FYA exclusions, see CA23110.

    Second Hand zero emission cars are added to the main rate pool and written down at 18%

    Benefit in Kind

    Cars first registered from 6 April 2020 (WLTP)

    CO2 emissions figureElectric range figure2020–212021-22
    0N/A0%1%
    1–50130 or more0%1%
    1–5070–1293%4%
    1–5040–696%7%
    1–5030–3910%11%
    1–50Less than 3012%13%

    steve@bicknells.net

    Is it a Repair, Replacement (RDI) or Improvement?

    This is probably one of the most difficult cost types to define and is extremely confusing for property investors.

    The guidance never seems to quite fit with the work undertaken.

    Its an issue for accountants too, often the investor lists all the costs rather than the projects so you end up with lots of entries like B&Q and have to try to reshuffle them into projects like a new kitchen.

    HMRC has a tool kit Capital v Revenue which gives some guidance.

    In general investors want costs to be repairs (which can be deducted from profit and save tax now) where as HMRC would probably prefer improvements (which are held back and used the Capital Gains Computation when the property is sold).

    In this blog I will try to give some further help aimed at owners of Buy to Let properties, the rules apply both to individual investors and those who invest via a company.

    Pre-Letting Costs

    The general rule is that if you buy a run down property that needs work doing on it before it can be let then that work is an improvement (capital cost).

    However, if you had a letter from an letting agent saying it was lettable in its purchase condition then the works could be a repair (revenue).

    If substantial work is needed, its best to discuss this with your accountant before the work is done to determine its status as an Improvement or Repair.

    The important point is the property needs to in fit state to let before the alterations, refurbishment, repairs are carried out if you want the costs to be repairs.

    Here is HMRC’s Guidance from PIM2030

    Repairs after a property is acquired

    Repairs to reinstate a worn or dilapidated asset are usually deductible as revenue expenditure. The mere fact that the customer bought the asset not long before the repairs are made does not in itself make the repair a capital expense. But a change of ownership combined with one or more additional factors may mean the expenditure is capital. Examples of such factors are:

    • A property acquired that wasn’t in a fit state for use in the business until the repairs had been carried out or that couldn’t continue to be let without repairs being made shortly after acquisition.
    • The price paid for the property was substantially reduced because of its dilapidated state. A deduction isn’t denied where the purchase price merely reflects the reduced value of the asset due to normal wear and tear (for example, between normal exterior painting cycles). This is so even if the customer makes the repairs just after they acquire the asset.
    • The customer makes an agreement that commits them to reinstate the property to a good state of repair.

    Repairs

    HMRC have agreed “A replacement of a part of the “entirety” with the nearest modern equivalent is allowable as a repair for tax purposes.” (Tax Bulletin 59)

    Examples

    • Replacing single glazed windows with double glazed windows
    • Replacing guttering with a new modern guttering
    • Replacing lead pipes with copper or plastic pipes
    • Replacing wooden beams with steel girders

    What about Kitchens?

    The following refurbishment works would be repairs

    • Stripping out
    • Replacing Base Units
    • Replacing Wall Units
    • Replacing Work Tops
    • Re-tiling
    • Floor repairs
    • Plastering
    • Wiring

    Provided you are replacing with a similar standard kitchen

    But if you add storage or equipment these items would be capital improvements.

    There are also special rules relating to expenditure on specified parts of buildings called
    ‘integral features’. The following are integral features:


    • an electrical system (including a lighting system)
    • a cold water system
    • a space or water heating system, a powered system of ventilation, air cooling or air
    purification, and any floor or ceiling comprised in such a system
    • a lift, an escalator or a moving walkway
    • external solar shading.


    Under these rules if expenditure on an integral feature represents the whole, or more than 50%,
    of the cost of replacing the integral feature, then the whole of the expenditure is to be treated as
    capital expenditure

    Replacement of Domestic Items (RDI)

    Since 2016 Replacement of Domestic Items Relief has replaced the Wear and Tear Allowance. The rules are in PIM3210.

    Note – RDI is not given for the purchase of new items that are not replacements

    In order for relief to be given, 4 conditions must be met:

    Condition A – the individual or company looking to claim the relief must carry on a property business that includes the letting of a dwelling-house(s).

    Condition B – an old domestic item that has been provided for use in the dwelling-house is replaced with the purchase of a new domestic item. The new item must be provided for the exclusive use of the lessee in that dwelling-house and the old item must no longer be available for use by the lessee.

    Condition C – The expenditure on the new item must not prohibited by the wholly and exclusive rule (see BIM37000) but would otherwise be prohibited by the capital expenditure rule (see BIM35000).

    Condition D – Capital Allowances must not have been claimed in respect of the expenditure on the new domestic item.

    If the 4 conditions are met, then a deduction for the expenditure on the new item can be claimed.

    However, a deduction is not allowed if:

    • The dwelling-house in question is, in full or part, a furnished holiday letting (special rules apply to FHL’s)
    • Rent-a-Room receipts have been received in respect of the dwelling-house in question and Rent-a-Room relief has been claimed in relation to those receipts.

    If the new item is of broadly the same quality/standard as the old item and doesn’t represent an improvement then the deduction is the cost of the new item. Note that for these purposes, just because an item is brand new does not make it an improvement over an item which has been in use for several years and suffered general wear and tear. For example, a brand new budget washing machine costing circa £200 is not an improvement over a 5 year old washing machine that cost around £200 at the time of purchase (or slightly less, taking into account inflation).

    RDI will be given for ‘domestic items’ such as:

    • Moveable furniture such as beds and free-standing wardrobes.
    • Furnishings such as carpets, curtains and linen.
    • Household appliances such as televisions, fridges and freezers.
    • Kitchenware such as crockery and cutlery

    Improvements

    If an alteration increases the market value of the building, changes its function, or extends the life of the whole building then its an improvement.

    We also noted under pre-letting that work to make a property lettable could be an improvement.

    PIM2030 states

    But there is usually no improvement if trivial increases in performance or capacity arise solely from the replacement of old materials with newer but broadly equivalent materials. For example, the replacement of pipes or storage tanks of imperial measure with the closest metric equivalent may result in slightly increased diameter or capacity but the cost is still revenue expenditure.

    Where a significant improvement arises from the change of materials, the whole of the cost is capital expenditure. This includes things like redecoration after the main work has been done (redecoration would ordinarily be a revenue expense). The entire cost is capital expenditure, including the expense of making good any damage to decorations.

    Alterations to a building may be so extensive as to amount to the reconstruction of the property. This will be capital expenditure and it can’t be deducted as an ordinary revenue business expense. 

    steve@bicknells.net

    Property and Capital Gains Tax Relief – 2020 changes

    The Government love making changes to property tax, often in order to increase tax.

    Legislation will be introduced in Finance Bill 2019-20 amending sections 222 to 224 TCGA. These changes will:

    reduce the final period exemption from 18 months to 9 months (there are no changes to the 36 months that are available to disabled persons or those in a care home)

    reform lettings relief so that it only applies in circumstances where the owner of the property is in shared-occupancy with a tenant

    make some revisions to job related accommodation relief by extending it to serving members of the armed forces, who are required to live away from home and, instead of being provided with job-related accommodation, receive payments from the MOD under its Future Accommodation Model and uses those funds to pay for accommodation

    legislate 2 ESC – D21 Late claims in dual residence cases and D49 Short delay in owner occupiers taking up residence

    clarify the rules concerning the transfer of residential properties between spouses or civil partners – those rules will make clear that where an individual transfers all or part of an interest in a residential property that they own to their spouse or civil partner, the receiving spouse or civil partner will inherit the transferring spouse’s or civil partner’s previous history of use of that property, resulting in a fairer outcome

    steve@bicknells.net

    Why are Capital Allowances important on commercial property?

    The rules are in Capital Allowances Act 2001.

    Sections 21 and 22 explain the Assets which can’t be claimed and Section 23 lists items that can be claimed

    Expenditure unaffected by sections 21 and 22
    1. Machinery (including devices for providing motive power) not within any other item in this list.
    2. Electrical systems (including lighting systems) and cold water, gas and sewerage systems provided mainly—(a) to meet the particular requirements of the qualifying activity, or (b) to serve particular plant or machinery used for the purposes of the qualifying activity.
    3. Space or water heating systems; powered systems of ventilation, air cooling or air purification; and any floor or ceiling comprised in such systems.
    4. Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.
    5. Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
    6. Lifts, hoists, escalators and moving walkways.
    7. Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
    8. Computer, telecommunication and surveillance systems (including their wiring or other links).
    9. Refrigeration or cooling equipment.
    10. Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.
    11. Burglar alarm systems.
    12. Strong rooms in bank or building society premises; safes.
    13. Partition walls, where moveable and intended to be moved in the course of the qualifying activity.
    14. Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.
    15. Advertising hoardings; signs, displays and similar assets.
    16. Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).
    17. Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.
    18. Cold stores.
    19. Caravans provided mainly for holiday lettings.
    20. Buildings provided for testing aircraft engines run within the buildings.
    21. Moveable buildings intended to be moved in the course of the qualifying activity.
    22. The alteration of land for the purpose only of installing plant or machinery.
    23. The provision of dry docks.
    24. The provision of any jetty or similar structure provided mainly to carry plant or machinery.
    25. The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.
    26. The provision of towers to support floodlights.
    27.The provision of—(a) any reservoir incorporated into a water treatment works, or (b) any service reservoir of treated water for supply within any housing estate or other particular locality.
    28.The provision of—(a) silos provided for temporary storage, or(b) storage tanks.
    29. The provision of slurry pits or silage clamps.
    30. The provision of fish tanks or fish ponds.
    31. The provision of rails, sleepers and ballast for a railway or tramway.
    32. The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition.
    33. The provision of fixed zoo cages.

     

    Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.

    (2)The provisions are—

    section 28 (thermal insulation of industrial buildings);

    section 29 (fire safety);

    section 30 (safety at designated sports grounds);

    section 31 (safety at regulated stands at sports grounds);

    section 32 (safety at other sports grounds);

    section 33 (personal security);

    section 71 (software and rights to software);

    http://www.legislation.gov.uk/ukpga/2001/2/part/2/chapter/3

    As CATAX say in their video 9 out of 10 commercial building owners are not claiming these capital allowances!

    The key reason why they aren’t claiming is because when you buy or develop a building the costs don’t tend to be broken down to show these items so you need to have them retrospectively assessed by a surveyor.

    If you are buying a commercial property the CPSE will ask the seller about Capital Allowances. Sellers will need to pool their fixtures expenditure (even where they have not, nor do not wish to claim allowances themselves) unless they are prepared to risk the price of their property being chipped down in recognition that no allowances will be available.

    https://www.taxation.co.uk/Articles/2014/04/08/323051/good-bad-and-ugly

    Often at the time of Sale a Section 198 will agree the Capital Allowances

    CAA01/S200 – S201An election under CAA01/S198 or S199 must be made by notice in writing to HMRC.

    It should contain the following information:

    * the amount fixed by the election, 
    * the name of each person making the election, 
    * information sufficient to identify the fixture and the relevant land, 
    * particulars of the interest acquired by or the lease granted to the purchaser; and 
    * the tax district references of each of the persons making the election. 
      
    The election is irrevocable. 
    
    
    The time limit for making the election is two years after the time when the interest is acquired by the buyer or the buyer is granted the lease. 
    
    A copy of the election must be included with each party's return for the first period affected by it. This will normally be the period in which the disposal or acquisition takes place. 
    
    The amount apportioned to the fixture must be quantified when the election is made. 
    https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca26850
    
    steve@bicknells.net
    

    It’s time for a Tax and NI free Trivial Benefit

    hand holding christmas voucher isolated over white

    Christmas is definitely a time when you can give your employees and yourself a trivial benefit worth up to £50.

    Section 323A ITEPA 2003 sets out a statutory exemption for trivial benefits. Under this exemption, if an employer provides a benefit to its employees, the benefit is exempt from tax as employment income if all the following conditions are satisfied:

    • the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) (see EIM21865)
    • the benefit is not cash or a cash voucher (see EIM21866)
    • the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements) (see EIM21867)
    • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services) (see EIM21868)

    Where the employer is a close company and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year (see EIM21869).

    Here is an example

    The Employer provides each of its employees with a bottle of wine costing £25 at Christmas. However, as an alternative, it provides employees who do not drink alcohol with a £25 gift voucher for a national supermarket chain which they can exchange for an alternative non-alcoholic Christmas gift. Both the bottle of wine and the non-cash gift voucher can be covered by the exemption.

    In fact all shop vouchers that can’t be cash in will count provided the value is less than £50.

    So why not make a list of special occasions:

    Birthday

    Christmas

    New Year

    Anniversary

    Holiday

    Easter

    Buy a stock of vouchers and give them out.

    This is a fantastic tax free benefit.

    steve@bicknells.net