Brewery

Why Did Six Forward Get Involved?

Although our accounting partner is well versed in annual reviews of capital and revenue expenditure on a piecemeal basis, they wanted a safe pair of hands to look after a capital allowances project of this size and complexity. In particular, they wanted a capital allowances expert with survey capability and knowledge of construction methods, as well as legislation and case law, to maximise the tax savings available to their client.

Following a common misconception surrounding CAA2001, section 12 – Expenditure incurred before qualifying activity carried on, the accountant was under the impression that the expenditure would be treated as incurred in full on the day the property was brought into use upon its completion – as such, our involvement was later than we prefer. In practice, this point only applies where expenditure is incurred before trade commences and as the company was actively trading before the project commenced, their entitlement to claim capital allowances already existed.

The deemed date of expenditure is important when determining whether the allowances will be eligible for write down via annual investment allowance (AIA) for accelerated relief in the year of spend, or via writing down allowances (WDAs) where out of time for AIA.

How Did We Help?

As trusted experts in this area of taxation, we carried out a full review to confirm entitlement and were able to maximise the claim and rate of write down by applying our legislative knowledge, and survey and valuation methodology to provide a robust and defensible report, fully rooted in correct statutory principles.

Despite the missed AIA against first year expenditure, these pools of allowances would still attract WDAs when brought into an amendable tax year. PMAs in years 2 and 3 were more significant with AIAs being available in each year to accelerate write down for more immediate tax relief. Amendment of an earlier tax return resulted in a tax rebate against tax already paid.

Relevant Legislation For This Case

Capital Allowances Act 2001 s.11, 15, 176

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