New Tax Reliefs
available to healthcare businesses – changes for 2008
Anyone
thinking about new expenditure on their property needs to be aware
of the changes to the system of Capital Allowances tax reliefs, confirmed
in this year’s Finance Bill, increasing their scope
and placing greater emphasis on the need for pre-planning. Identifying
allowances early in a project helps optimise their benefit – and
notably in a tighter financial climate, the planned bottom line cost
savings will enhance a funding proposal. We also see Energy Performance
Certificates (EPCs) being introduced this year, and potentially
fully utilising the benefits of Enhanced Capital Allowances (ECAs)
will not only produce greater tax savings, but lower running costs
and support for a higher EPC rating.
Annual Investment Allowance
From this April the first £50,000 of expenditure each year
on Plant & Machinery (P&M) such as heating, lifts, and qualifying
fit-out, will be claimable as a tax deduction in the year of the
expenditure. Allowances above this level will then be claimed on
a reducing balance each year (see below). The principle advantage
is that it anyone incurring building expenditure with significant
Plant & Machinery content – say replacing a heating system
can budget for the benefit of this tax relief coming into account
at the year end.
Integral & General Plant & Machinery
The new approach to P&M allowances is a split between the Integral
Plant expected to be in any building (heating & cooling, lifts,
hot & cold water systems, & electrical systems) and the General
Plant e.g. kitchens, bathrooms and other trade related items. The
former will have a 10% per annum rate of claim and the latter a more
attractive 20% rate of claim. The intention of the split is to place
emphasis on the Enhanced Capital Allowances scheme which promotes
low carbon or energy saving equipment with 100% tax relief. Relevant
areas are boiler equipment, air conditioning, lighting and a range
of other areas including water technologies. It will become important
to ensure that a project team are briefed to choose qualifying equipment
where the opportunity arises. The new inclusion of entire electrical
systems is an important change to the legislation and increases the
emphasis on the 100% ECAs - for example for the lighting system.
CAs, ECAs & EPCs
Tax relief has so much off-putting jargon that in many instances
those commissioning expenditure on buildings fail to engage with
it as a subject and leave it to chance that all will be well. Given
that in a typical healthcare project perhaps over 30% of the build
cost (and in a refurbishment this might rise above 50%) can qualify
for tax relief - the difference between a well-prepared claim and
a poorly-considered one may be significant.
This information is provided by Davis Langdon & Seah International.
David Rees is a partner in Davis Langdon and manages the southern
region of their Property Tax division which is the UK’s largest
consultancy advising in this area. The firm are specialist surveyors
and provide expertise to assist the accountant in dealing with allowances.
An initial review of any potential Capital Allowances opportunity
is provided at no cost and where appointed fees are on a performance
basis. Contact – tel. 02380 682800 or david.rees@davislangdon.com
This article was written for First Practice Management by
