Because the put up COVID-19 lockdown interval locations ever extra demand on automotive retail companies being lean and environment friendly, Alun Oliver, managing director of E³ Consulting, explains why now may be the time for an intensive property tax overview.
“Money is king” an oft cited mantra by enterprise gurus resembling Jack Welch (former CEO Basic Electrical).
For a lot of automotive dealerships and restore centres in a put up COVID-19 world it is going to be important to optimise all out there money flows to assist ‘climate the storm’ as companies look to stabilise and rebuild their funds, manufacturers, market share and profitability.
Tax effectivity is a vital aspect of any cashflow overview and notably these dealerships which have, previously, invested considerably of their property property, be it their company places of work, new showrooms, valet bays, electrical charging factors and/or restore/service workshops throughout the UK.
For any property proudly owning companies enhancing money flows might be comparatively difficult in any financial local weather. Nevertheless, in these distinctive occasions a property tax overview could facilitate a price efficient, and importantly, a comparatively fast approach to enhance money movement – from vital tax rebates.
Whether or not proudly owning, leasing or investing, there are vital alternatives to say capital allowances (CAs), repairs and upkeep (R&M) and (topic to the precise circumstances) land remediation tax aid (LRTR) – to recuperate overpaid tax beforehand paid to HM Income & Customs (HMRC).
In almost 30 years of working within the area of property tax, I nonetheless constantly see over 80% of circumstances reviewed, the place both no declare, or solely a superficial declare has been made – which means that further tax financial savings can nearly positively be achieved.
So, it’s important that UK taxpayers think about re-visiting earlier tax returns and usher in skilled and impartial property taxation specialists to re-assess and overview previous expenditure to reinforce their tax financial savings and the place relevant receive any out there tax rebates.
Purchasers usually understand that it’s all too late to vary issues, that the quantum of tax is just too little to fret about, or that the prices are prohibitive.
Generally their tax advisers even reinforce this ‘do nothing’ method – sometimes as a result of they don’t want to illustrate tax financial savings that they had beforehand missed – leading to pointless tax funds.
Nevertheless, provided that the property are nonetheless owned, it’s worthwhile reviewing previous expenditure to see if further tax financial savings could possibly be claimed.
One current mission concerned the overview of a portfolio of dealerships throughout the South East, paying company tax.
We reviewed ten refurb/becoming out initiatives – accounting for over £4m of expenditure between 2015 and 2019. The dealership had not claimed the capital allowances on these properties. Their whole tax financial savings over time will equate to just about £500,000.
Amending their prior yr tax returns has generated a major tax rebate from HMRC, in addition to additional allowances going ahead, decreasing their future tax funds, till the entire allowances are consumed.
Appearing for Westover Holdings we undertook a full capital allowances overview on their then newly constructed Jaguar Land Rover (JLR) dealership in Christchurch (since offered to Hendy Group).
Figuring out roughly 35% of the mission expenditure as eligible capital allowances declare – their whole tax saved over time might be greater than £200,000.
Election beneath s.198 CAA2001
Purchasers of second-hand property usually consider (or are inspired to take action by their vendor) that there isn’t any additional tax aid out there on a purchase order involving an election beneath s.198.
Nevertheless, that is not often the case and there are sometimes ‘latent’ allowances out there.
Elections are sophisticated and property tax isn’t correctly understood by the conveyancing lawyer – so tax aid is ceaselessly missed or a restricted election worth (£1/£2) offered as a ‘fait accompli’.
In absence of particular contract wording, there may be usually as much as two years for the events to agree the elective s.198 election, which determines the worth of any capital allowances that may move between the events.
Nevertheless, skilled property tax specialists will often establish vital tax aid over and above any proposed or accomplished election. These could embrace purchases the place the seller was not entitled to say allowances, legislative modifications or the place the prices had been met by others.
Integral Characteristic Allowances (IFAs) solely claims can quantity to between 5% and 15% of the acquisition consideration and are typically calculated as a valuation apportionment of the acquisition value paid. Therefore a overview of previous transactions – whether or not involving s.198, or not – should yield further tax allowances and thus end in additional tax financial savings or a rebate.
Repairs & Upkeep (R&M)
Repairs are absolutely eligible for tax deduction and as proven within the current case of Steadfast Manufacturing & Storage Restricted v HMRC when 100% tax aid is out there HMRC will scrutinise and problem claims – searching for to deal with the expenditure as capital and NOT income
Once more, we often see taxpayers beneath declare or not declare in any respect, perceiving their expenditure to be ineligible.
Conversely, there are these whose accountants traditionally declare all property expenditure as R&M with none actual scrutiny of the rationale, goal or nature of expenditure – which helps to find out the ‘right’ tax remedy.
Land Remediation Tax Aid (LRTR)
Land remediation tax aid (LRTR) can even present priceless tax aid (as much as 150%) throughout initiatives for dealerships topic to UK Company Tax.
LRTR is out there on qualifying expenditure in tackling the limitations to growth brought on by contaminated and/or long run derelict land.
Moreover, if a LRTR declare leads to the corporate making a loss within the accounting interval it might give up that loss and obtain a payable tax credit score from HMRC.
The speed of the credit score, 16% of the qualifying land remediation loss foregone, has not been adjusted since inception and is thus very beneficial in comparison with present Company Tax charge of 19%.
If what you are promoting has beforehand invested in website acquisition, growth, extension or refurbishment, then a contemporary overview of your property tax place may end in a major tax rebate and/or future financial savings.
The above examples could assist illustrate among the potential further declare alternatives that may be out there throughout the automotive sector.