Commercial Property Issues and Opportunities Seminar

How to Save Tax on Your Property

Relief from the Pain of Paying Business Rates

Myles O’BrienDirector & Head of Business Rates, Aitchison Raffety

Relief from the Pain of Paying Business Rates

• What are Business Rates?

• The impact of Government ‘tinkering’.

• Where are we now?

• What does the Future hold?

• How can Aitchison Raffety help to ease the pain?

How to Save Tax on Your Property

22nd April 2015

What are Business Rates?

How to Save Tax on Your Property

22nd April 2015

• Taxation on occupation• Close relationship with rental values• 5 yearly revaluations (until recently!)• Current ‘Revaluation’ based on 1st April 2008 values• Current year will drive values for 2017 Revaluation

The Impact of Government ‘Tinkering’

• Retail discounting• Local shop discounts• Reoccupation relief scheme• Business Improvement District levy's• Changes to checking and challenging

business rates proposal • Changes to checking and challenging

business rates postponement• Appeal cut-off date (31st March

2015)• Government austerity drive and the

defence of the rating list

How to Save Tax on Your Property

22nd April 2015

• Increase of small Business Rate relief together with annual extension

• Business Rates deferment scheme• Change to Empty Rate Relief

threshold from RV £18,000 to £2,600

• Postponement of the 2015 Rating Revaluation to 2017

• Uniform Business Rate Capping at 2%

• Localism (retention of business rates income)

Where are we now?

• Discussion Paper on “modernising Business Rates”

• Scrutiny of Tax Avoidance schemes

• The Election

• Revaluation year

• Localism

How to Save Tax on Your Property

22nd April 2015

What does the Future hold?

How to Save Tax on Your Property

22nd April 2015

• New Government, new ideas?

• Will Business Rates be retained?

• Based on individual property valuation

• Small Business exemptions

• New appeal guidelines

How can Aitchison Raffety helpto ease the pain?

• Reliefs and exemptions

• Empty Rate advice

• Rates Audit

• Advice and appeals strategy

• Budgeting

• Completion of Requests for Information

How to Save Tax on Your Property

22nd April 2015

Capital Allowances and Property Taxation

Ricky NoimarkTax Development Manager, MHA MacIntyre Hudson

What Rate?

• 8% on special rate expenditure

– Long life assets– Integral features– Thermal installation

• 18% on other plant and machinery

UNLESS …..How to Save Tax on Your Property

22nd April 2015

What Rate?

• 100% annual investment allowance

• 100% FYA on expenditure incorporating

energy efficient or water saving technologies

(‘enhanced capital allowances’)

• 100% FYA on low CO2 emission cars

• Short-life asset electionHow to Save Tax on Your Property

22nd April 2015

Capital or Revenue Expense?What does Case Law say?

• Lord Denning in Heather v PE Consulting Group Ltd:– “The courts have always been assisted greatly by the evidence of

accountants. Their practice should be given due weight; but the courts have never regarded themselves as being bound by it. It would be wrong to do so. The question of what is capital and what is revenue is a question of law for the courts”.

• Lord Cave in Atherton v British Insulated Cables Ltd:– “When an expenditure is made, not only once and for all, but with a

view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital”.

How to Save Tax on Your Property

22nd April 2015

Capital or Revenue Expense?• Capital

– Capital allowances– Improvements or alterations– Entirety test – where entirety replaced then capital

• Revenue– 100% P&L deduction– Like for like replacement = repair– And where replaced with modern day equivalent, e.g. double

glazing– If repairs capitalised – follow the accounts, i.e. allowable

depreciation

How to Save Tax on Your Property

22nd April 2015

Setting Or Function?

How to Save Tax on Your Property

22nd April 2015

Splashbacks and lighting (No)

Wipe-clean tiling (No)

Sloping floor (Yes)

Apportion Preliminary Costs

Incidental Costs

Cubicles (Some)

New Property Purchase

Type of Property

Purchase Price

Typical Allowance Proportions

Potential Tax Saving

% £ Corporation Tax Rate (20%)

Hotel £40m 40% £16m £3,200,000

Offices £15m 30% £4.5m £900,000

Industrial Unit £10m 10% £1m £200,000

Shop Shell £10m 5% £0.5m £100,000

How to Save Tax on Your Property

22nd April 2015

Fixture Rules Post 2014

Post April 2014 – Could the Vendor claim allowances?

• Yes - Purchasers claim limited to vendor’s proceeds– Must have pooled the expenditure in their tax computations– S198 election needs to be in place

• No – Just and reasonable apportionment of cost for fixtures claim (but beware of second purchases post April 12)

• i.e. From 2014 if the seller could have claimed but didn’t, then no one will ever get allowances on those assets

• Integral fixtures - vendor unlikely to have been able to claim as didn’t qualify up to 1 April 2008

How to Save Tax on Your Property

22nd April 2015

How to Save Tax on Your Property

22nd April 2015

Owned Since 2006

Bought in June 2014

Bought in April 2015

Example

£200m

£210m

Interactive Case Study:Practical Ideas with Commercial Property

OwnershipNigel May

Tax Partner MHA MacIntyre Hudson

David HudsonSenior Business Rates Consultant

Aitchison Raffety

Interactive Case Study

• Company previously traded out of ‘The Pickle’ which was owned by company pension scheme but now have purchased ‘The Splinter’ directly.

• ‘The Splinter comprises office buildings and surrounding land but land is likely to be made into new offices and transport is poor.

• ‘The Pickle’ is likely to remain vacant whilst trustees of pension scheme decide what to do and planning permission is being obtained.

How to Save Tax on Your Property

22nd April 2015

Interactive Case Study

Tax and Commercial Issues Business Rates

• Trustees - consider dilapidations• Trustees - consider onerous lease• Company - double running costs?• Convert premises into residential?• Capital allowances post April 2014• Asset protection within group and

BPR• Group Reconstruction• VAT implications

• Phased occupation• Empty rate exemption• Managing exemption periods• Other mitigation schemes• Valuation during refurbishment• Valuation “in repair”• Refurbishment - repair or

alteration?• Empty rates on new premises

How to Save Tax on Your Property

22nd April 2015

Commercial Property Issues and Opportunities Seminar

Q & A Panel