Experts from Birketts, Roche, and Price Bailey gathered towards the end of 2022, at Norwich City Football Club to host their annual property seminar, diving deeper into the current challenges and opportunities facing the regional, national, and international property market.
Chaired by Price Bailey Tax Director, Steven Butcher, the well-attended session featured insights from Roche Partner, Graham Jones, and Building Surveyor, Paul Kelly, in addition to contributions from Birketts Associate and Senior Associate – Rebecca Bond and Steven Bell. Senior Managers, Charlotte Page and Jon Chambers from Price Bailey also shared current financial insights within the industry.
In our third part of our round-up series we will be summarising Jon Chambers’ thoughts on the impending end of the super-deduction in relation to landlords and tenants.
Only corporate taxpayers qualify for the super deduction. LLPs, as well as general partnership and individuals trading as property developers and property traders were not eligible for this scheme. We take a look at how corporates will be affected post 31 March 2023.
Yes, the qualifying plant and machinery does need to be new. However, HMRC do allow this definition to include ‘used’ machinery that is nonetheless considered new i.e. it may have had limited use for testing, delivery or demonstration. Acquisitions from connected parties do not therefore qualify and are generally excluded from enhanced tax relief.
The main types of expenditure that qualify include plant and machinery that would generally qualify for capital allowances in the general pool: furniture, IT equipment and servers, CCTV, alarms, electric vehicle charging points; or the special rate pool.
Expenditure to be allocated to the special rate pool for commercial buildings, include:
As many businesses are now aware, the scheme offers first-year relief of 130% on general pool items and a 50% first-year deduction on qualifying special rate pool assets. Unlike the Annual Investment Allowance, there is no upper limit on expenditure.
The time-frame for claiming super deduction runs from the 1 April 2021 to 31 March 2023. With limited time to plan for qualifying capital expenditure, it is necessary to consider the tax implications for companies whose accounting periods end after 31 March 2023 and that have bought relevant assets within the qualifying period.
Other key area that landlords should be aware of regarding super deduction?
Balancing charges can potentially be minimised by using a section 198 election. The election can fix nominal disposal values for the assets upon which the super-deduction and SR allowance have been claimed.
Due to the exclusion for leased assets, a landlord will not obtain super deduction relief on contributions made towards a tenant’s fit-out costs where the tenant has purchased assets that are not treated as “background plant and machinery”. Background plant and machinery is leased with land as part of a mixed lease, of a type that might reasonably be expected to be installed in various types of building and whose sole purpose is to make the building usable. Therefore assets such as office furniture would not qualify in this situation.
Due to the requirements the legislation places on taxpayers to calculate balancing charges on disposals of super deduction (or SR allowance) assets, it is crucial to maintain good quality records for each relevant asset.
If you have any questions regarding super deduction, you can contact Jon Chambers using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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