Capital Allowances advice for Solicitors
In the same way that we would not provide any legal advice to our clients, the majority of solicitors shy away from giving tax advice. Unfortunately, this can leave a marked gap in the service you provide as tax is often a key element of an instruction. Not addressing Capital Allowances correctly can result in substantial financial loss to clients and in some extreme instances, your firm facing a negligence claim.
Capital Allowances are particularly relevant during a conveyance. Non-compliance with the Capital Allowances requirements can result in the loss of all entitlement to this valuable relief and even a claw back of past relief claimed resulting in a surprise tax charge, not to mention an unhappy client!
We can cover all you Capital Allowances requirements ensuring your clients get best advice and upholding your firm’s duty of care.
We work in conjunction with a large number of legal practices across the UK to help their clients maximise on the Capital Allowances opportunities that are prevalent in real estate.
Whilst providing the best advice is the primary objective of our work, another important aspect is to protect your legal practice. Solicitors, especially those providing conveyance services, owe a duty of care to provide effective advice on all aspects of a transaction they are instructed on. This extends to many areas of tax, even if your care letter says “we don’t give tax advice”.
How Can STax help us with Capital Allowances?
Some of the more common areas on which we are asked for advice include:
Capital Allowances during a conveyance:
When a commercial building changes hands, in most instances, the parties should enter into a joint election to fix the effective transfer value of Capital Allowances on fixtures. For freehold transactions these are referred to as section 198 elections after the relevant part of the Capital Allowances Act (CAA2001) that empowers them.
These elections are often not put in place or are implemented badly. Because of this the Treasury felt there was a risk that businesses were double claiming allowances and brought in new legislation to effectively enforce the use of these elections.
FA2012 contained amendments to S187 (S187A & S187B) of the CAA2001. Broadly speaking this means that unless the transference of allowance is handled correctly then both parties (purchaser and vendor) lose and the Treasury has a net gain.
Post April 2014 pooling (employing a firm like STax to calculate the amount of allowances available) of allowances prior to sale becomes mandatory. This works in conjunction with the transfer value requirement detailed above. This means that anything not quantified, claimed and then transferred in a 100% correct manner will be lost.
Whilst advice is best given before exchange, lost situations can be repaired in certain circumstances and we may be able to claw back capital allowances lost.
Non-advice in this area is a major source of negligence claims against conveyancers. Give us a call today to protect both your clients’ and practice’s interest.
Section 198 elections:
A s198 election is the normal mechanism for transferring capital allowances on fixtures during a conveyance. We see a lot of s198 elections, the vast majority are written so badly as to be legally void and subject to challenge by HMRC and tax savvy parties on the other side of the transaction. We know it happens because we are regularly engaged to advise these parties.
This can open your clients up to potentially substantial and unexpected loss. Getting this document wrong is not going to win you any friends!
Resources and CPD training:
We are happy to conduct CPD lectures and training for you and your team be at as part of our webinar program or even a visit to your offices. This training for you and your staff will allow the effective identification of areas of risk & opportunity, ensure compliance with the Capital Allowances Act and clock up a few more CPD points at the same time!
As well as providing advice direct to your clients we can also supply you with a number of resources, including:
• Draft emails to bring these tax related matters to you clients’ attention
• Assistance answering Capital Allowances section of CPSEs
• Articles for news letters
• Model documents e.g. s198 elections
• Technical briefs for use within your practice
If you have a specific case you want to get some expert help with or simply want to find out more, please don’t hesitate to contact us today