Office block

Why Did Six Forward Get Involved?

Our mutual client had acquired a modern purpose-built office building in 2020 from a Seller that was entitled to claim capital allowances. As part of the pooling and fixed value requirement introduced by the Finance Act 2012 and the Capital Allowances Act 2001 (CAA2001) s187A and s187B, the Seller restricted our client to £1 in respect of main pool plant and machinery.

While maintaining 7 floors of office suites, our client carried out alteration works to the upper floors, applying for a change of use to residential flats. Although section 35 of CAA2001 would otherwise restrict a claim for these works, the failed change of use application and continued use of the upper floors as office suites allowed an additional claim against this new capital expenditure.

How Did We Help?

Despite the restriction on main pool plant and machinery capital allowances, the historic ownership and limited property improvement after 1 April 2008 allowed a claim against certain special rate pool capital allowances (known as pre-commencement integral features) without restriction or cooperation from the Seller.

Furthermore, the conversion of the upper floors resulted in capital expenditure of circa £3m which was analysed as part of our engagement. This additional route to claim resulted in circa 65% of the expenditure qualifying for capital allowances.

The allowances identified attracted write down via annual investment allowances (AIA) for accelerated relief against the first £1m of expenditure in each accounting period. The residue attracted writing down allowances of 18% and 6% per annum for main pool plant and machinery and special rate integral features, respectively.

Of the total £615,600 potential tax savings (at 19% Corporation Tax rate), £415,028 (67%) was relieved in the first two years of write down.
By working openly and transparently with both client and accounting partner, we were able to spot additional opportunities to maximise their results and act quickly to achieve the best possible outcome for the client.

Relevant Legislation For This Case

Capital Allowances Act 2001 s. 11, s15, s33A, s181, s187A, s562

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