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In this spirit of our weekly tax chat emails, our blog contains our thoughts and comments on the current hot topics in the world of tax.
Tax Chat - Monday 23 January 2012
Currently there is no time limit for claiming capital allowances on fixtures in commercial buildings. However, this rule recently came under threat when HMRC proposed to introduce the requirement that qualifying expenditure on fixtures would need to be pooled within 2 years of incurring the expenditure. The good news is that new proposals now suggest such a restriction will not be introduced, and that instead capital allowances can be claimed provided the claims are made before the assets are sold on, disposed of, or transferred to another person.
It is expected the legislation will instead focus on the purchase of second hand buildings by introducing measures to ensure the seller and purchaser agree on the value attributable within two years of the transfer of the property that contains the fixtures.
Although this is a further compliance requirement and another point for sellers and purchasers to agree on, we believe encouraging these discussions and documentation will be very useful. We often prepare computations where a transfer out of, or into a company has happened and where it is difficult to ascertain what value was attributable to fixtures. In such cases this can lead to additional work to try to place a value on these assets. By encouraging documentation at the time of sale these problems can be removed and the tax computation process which follows becomes easier.
Action points:
• If you recently bought a commercial building it is worth checking that you maximised all possible claims for capital allowances – this can provide a valuable tax saving at time when cost management is ever more important it is not too late to claim now even if the information that you have is sketchy.
• Also, if you are considering buying or selling a building – it is worth seeking tax advice in advance of the sale to make sure that your tax allowances are maximized.
For further information or to discuss, please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk.
In the Autumn Statement the Chancellor announced a new Seed Enterprise Investment Scheme (SEIS) which will become available from 6 April 2012.
This scheme from will offer individuals 50% income tax relief if they invest in shares of qualifying companies. A qualifying company is one that is a new (two years old or less) smaller company (With assets up to £200,000 and with a maximum of 25 employees). The company must be a new business carrying on a trade and must not have previously raised money under EIS or VCT schemes.
The 50% income tax relief is available on the first £100,000 of investment made per annum. However like EIS this relief will not be available where the individual is an employee of the company and/or where they have more than a 30% interest in it.
Also HMRC intend to offer a capital gains exemption on gains realised in 2012/13 which are reinvested through SEIS in the same year. This means if you make a disposal, the first £100,000 of the gain can be fully reinvested into SEIS so no capital gains tax becomes due. Furthermore, provided the qualifying conditions are met, which include that the shares are subscribed for wholly in cash, fully paid for at the time of issue and are held for three years, the onward sale of these shares will also be exempt from capital gains tax. This therefore potentially allows a complete exemption of capital gains tax unlike rollover relief or holdover relief where the capital gains tax is deferred.
In summary this scheme appears to be a more junior version of the EIS scheme to encourage investment in smaller companies. It contains many of the same limitations around connection with the company, the holding period and the fully paid up in cash requirement. However, what is particularly attractive is the level of income tax relief at 50% rather than 30% offered by EIS. However this will have to be weighed up against the additional risk associated with investing in smaller and younger companies.