Tax & Legal
Potential tax allowances
The following tax allowances may be available to purchasers of units on Ascot Business Park. This note is only meant as a guide and each purchaser should seek professional advice.
Industrial Building Allowances (IBA’s)
IBA’s are still available to owners on the structure of a building. These involve costs of structure including an element of demolition, foundations and building.
IBA’s are to be abolished/wound up in 2011 and transition rules are currently in place.
Plant and Machinery Allowance:
Plant and machinery includes; air-conditioning heating, security systems, fire system etc.This benefit is particularly attractive to small businesses or start up companies where they get a 50% credit in the first year.
This is a 7 year benefit
Photo voltaic, wind power, rain water harvesting etc is dealt with under new Enhanced Capital Allowances with very beneficial tax credits.
Capital allowances
Tax relief in the form of capital allowances available on plant and machinery, has to be based on an apportionment of the purchase price paid. The relevant statute is CAA 2001, section 562. The apportionment procedure is set out in the Valuation Office manuals and requires that the following is calculated:-
- The land value based on a cleared site with planning permission for the current modern equivalent building
- The replacement cost of the building at the date of sale
- The replacement cost of the plant and machinery at the date of sale
Based on this procedure and a purchase price at the offer level on Unit G we estimate that the range of expenditure that would qualify for plant and machinery allowances is:
£100,000 to £130,000
The difference in the upper and lower end of the range reflects the potential variation in values that can be attributed to the above three variables. It is also due to the fact that there is no statutory definition of plant. This means that certain items of plant, such as parts of the electrical installation are at a higher risk of being disallowed than others.
The capital allowances on plant and machinery are given at 25% per annum on a reducing balance basis until fiscal year 2007/08. From 2008/09 onwards, the rate for this pool reduces to 20%. At present, no allowance has been made for classification for plant and machinery assets “integral to a building” at 10% per annum on a reducing balance basis, as this is subject to consultation.
Taking the mid point of the range to the left, the cumulative tax relief available is set out in the graph below to: UK companies paying tax at a rate of 28% from 2008/09; higher rate income tax payers; and small companies rate of 20% from 2008/09. Allowances have been allocated to the 20% plant & machinery pool.
Legal aspects
The Long Leasehold interest being sold will have the appropriate election attached required to pass the entitlement to claim capital allowances. No prior claims have been made on the works within the building that would cause a restriction under CAA 2001, section 185.
Please note that this report has been prepared based on information provided in November 2007.
For more information please contact:
Rachel Sanders
Tel: 020 7061 7141
E-mail: rachel.sanders@crosherjames.com
www.crosherjames.com