This blog brings me back to a favourite topic of accountants and their reluctance to engage with specialist capital allowances firms for the benefit of their clients who own commercial property. Having now worked with some of the top specialist capital allowances professionals for the past year and spoken or corresponded with accountants working at all levels. Here are my conclusions (in no particular order).
1) This could be embarrassing.
Some accountants are fully aware of the potential for making a capital allowances claims for their clients but have only come to this realisation in recent years. They are now in that awkward position where they have had a client for a number of years who owns commercial property but they have not advised them to make a capital allowances claim. Result they keep quiet and hope that the client either never talks to a specialist or if they do will not believe them over their accountant.
2) The concern over risks to their reputation.
Accountants are worried that if they advise a client to use a third party capital allowances specialist that there is a real reputational risk. The accountant perceives that if the capital allowances company makes a mistake this will reflect badly on them and that they could lose their client. This is a tangible concern and there are some capital allowances claims companies where an accountant could run this risk. However my advice would be, that like any other organisation that relies on an outside provider, if you do your homework thoroughly it does not take long to realise who are the experts in the market place.
3) Frequent misconceptions about the legislation.
There are so many misconceptions about capital allowances claims that it is not possible to list them in this short piece. One of the most widely held is that undertaking a capital allowances claim devalues the property and therefore when it is sold it will be subject to a higher level of Capital Gains Tax. The first statement is untrue and therefore so is the second. If anybody wants to know the legislation that explains this in more detail please let me know and I’ll e-mail the evidence.
4) How do I cover my costs?
Accountants are concerned that supporting the capital allowances claim will require a great deal of their time and will they get reimbursed. The first point to make is that generally not a great deal of the accountants time is required to support the capital allowances claims process. Secondly many accountants do make a charge to their clients for their time or negotiate a contribution from the capital allowances claims company. The point is that as long as the client is left significantly better off the accountant can be reimbursed for their time.
5) I look after my clients capital allowances claims already.
This can be born out of a lack of understanding of the full scope of the Capital Allowances Act 2001 and the full interpretation of “plant and machinery” and “integral features” as they relate to commercial property. Accountants are very conversant with the claiming of furniture, carpets and other loose chattels but may remain unaware of the inherent fixtures which may also be claimed if the work is undertaken by a specialist surveyor preferably with tax qualifications.
6) I can do this myself
Lastly and this is always well intentioned, we know of accountants who make the effort and do undertake a capital allowances exercise themselves especially where the nature of the expenditure on a property or refurbishment has been fully broken down in a schedule of rates or bills of quantity. In these cases accountants have shown they have been able to identify a relatively high percentage of the capital allowances that were allowable. However we also know of cases where they have claimed a very low percentage of the total capital allowances available or claimed for things which were not allowable at all.
A good example of this is where an accountant had a client with a large hotel costing £5m. The accountancy firm calculated that the capital allowances available to be claimed were in the region of £1m but when they commissioned a capital allowances expert to carry out the work found out there were over £2m of capital allowances which were claimable.
I hope that the above does not come across as being too cynical as we speak to accountants on a weekly basis who having researched the subject conclude that commissioning a capital allowances specialist is in the best interests of their clients. We are always happy to talk to accountants and answer any questions they may have to enable them to recommend our services to their clients.
Curtis Plumstone Associates