Restaurant

Why Did Six Forward Get Involved?

We were asked to carry out an historic review of the client’s restaurant portfolio to identify relief that may have gone unclaimed.

On this occasion, the nuances of the capital allowances legislation were unfavourable, and our client was not entitled to claim capital allowances against certain second-hand property fixtures being passed by the Vendor. With pooling being missed and in the absence of a capital allowances clause to outline the intent of each party post-completion, a s198 election could not be agreed and it was too late for our client to benefit from the Vendor’s unclaimed allowances.

It was stressed at this stage that any intended property acquisitions should be flagged to us prior to exchange where we can proactively support the transaction with interpretation of answers to CPSE.1 and provide bespoke contract clauses to help secure these allowances.

How Did We Help?

Due to our knowledge of legislative changes driven by FA2008, we identified that our client was entitled to pre-commencement integral features for part of the portfolio resulting in a more limited claim in the absence of pooling. Amendment of the relevant tax return allowed full and immediate write down of the special rate pool via annual investment allowances (AIAs) which would otherwise have attracted write down of 6% per annum over may years. Relief in this case was given by way of a tax rebate.

From further investigation, it became apparent that certain properties had undergone alteration and improvement since purchase. In most cases, the works carried out were minor and the expenditure deemed to be of a revenue nature, however, one property had been partially demolished to make way for a new building with a larger footprint. On review of fixed asset register and tax computations, we confirmed that the expenditure had previously been treated as ineligible for capital allowances. As well as making a claim for the pre-commencement integral features that were present at purchase, a more substantial claim was then made against the c £1m of property improvement expenditure that followed.

As part of our due diligence, we became aware of the receipt of a grant via the Tourism Investment Support Scheme (TISS). Further review of funding terms allowed us to apportion the claim accordingly to avoid overstatement of the allowances and associated tax relief.

What Was The Outcome?

Although the initial results seemed limited, we were able to showcase our expert approach and a thorough review of all expenditure resulted in a great outcome for the accountant and client.

Relevant Legislation For This Case

Capital Allowances Act 2001 s.11, 15, 33A, 176

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