In recent years capital allowances may have been ignored as profits fell to a level which meant tax relief was not necessary. However, as firms move back into a tax paying position and possibly look to expand their store portfolio, capital allowances will become important once again. Even for those businesses which are still loss making there are opportunities to improve cashflow through surrendering tax losses for expenditure on energy efficient plant and removal of asbestos for cash tax credits.
We reviewed a large London department store’s historical capital expenditure. Capital allowances had been identified by the surveyors and accountants but our reanalysis identified an additional £8m of allowances which had been missed. This is because the previous analysis had not included changes to legislation. We then worked with the property and tax team to ensure allowances were correctly identified in the future.
Companies often wrongly assume that allowances are “lost” if they are not used in the year of expenditure. However, as long as the stores are still trading it is possible to make additional capital allowances claims for expenditure in the current period. It is not necessary to reopen the tax computations. In practice, record keeping for earlier years may be problematic, but our surveying skills enable us to inspect the property and produce a breakdown for HMRC.