How long have you been a tax adviser Alun?
Since April 1994 when I joined Crosher & James Quantity Surveyimg practice and about a third of my work was property tax related.
How did you come to specialise in property tax and specifically capital allowances?
I trained and qualified as a Chartered Quantity Surveyor (QS) with WS Atkins and moved to Crosher & James. At the time they were one of only a handful of QS firms specialising in Capital Allowances.
In my last QS role I spent six month negotiating with the contractor over £50K, yet only four weeks or so after starting in capital allowances I sent out my first claim report for a property investor client – saving them £3.5m… I was hooked at the opportunity to really impact clients!
What are the most common mistakes you see made by non-specialists in capital allowances?
Generally non-specialists Accountants fall into two camps
- Those who overclaim
- Those who underclaim.
Both types of mistake can have a seriously negative impact on the client and their projects.
Too often we hear and see accountants claiming too much as plant & machinery and providing only a fairly rudimentary analysis of the project expenditure. Also high levels of expenditure get categorised as Repairs (100% deduction) when actually they are improvements and should be capital – whether of not eligible for capital allowances (SBAs, PMAs, IFAs or other).
Claiming too little, is to me worse, as the client ends up paying too much tax! The reasons range from lack of awareness, apathy, to old school (and inaccurate) views that Capital Allowances are only a timing difference!
Solicitors also make mistakes here, particularly when acting on commercial property transactions. They often have a poor understanding of the New Fixtures Rules (ss.187A/B CAA2001) and too often default to a s198 election and accepting at face value the responses from the other party. Failure to properly deal with the CAs during a second-hand property transaction can result in NIL capital allowances!
What are the most valuable issues on which you have given advice?
The biggest capital allowances claim was a £600m power station where some 96% was accepted (after scrutiny & negotiation) by HMRC as Plant & Machinery with the balance as then, Industrial Buildings Allowances (IBAs).
What differences might you expect to see in the coming year that could impact those issues?
After the impact of Covid-19 there are certain sectors that will have been impacted more negatively as others. Leisure & Hospitality for example may have lower trading and thus may see losses increase and thus less requirement to seek out tax saving advice – until trade levels improve and growing profitability.
Other sectors – Logistics for example – are seeing strong demand and growth. in the medium term I feel taxes will increase as the Government has to rebuild the country’s finances after the JRS and wider C-19 support measures – but the time frame for that is not at all clear!
What has been your worst experience with HMRC?
Generally HMRC has, in my experience, been relatively fair and reasonable; although on the odd occasion there are some more pedantic enquiries.
One annoying one was a query as to why we were claiming capital allowances on air conditioning units. I simply replied asking the Tax Officer to reference the legislative or case precedent whereby they felt HVAC was disallowed; after which the claim was accepted. On balance I have had more positive feedback from HMRC than negative experiences – we regularly get compliments on the comprehensive nature and transparency of our claim reports!
How would you describe your attitude to tax?
I consider that tax is an essential part of life that enables Government to do so much. Equally tax can successfully be used to encourage or modify behaviour. There is a balance and it is important that Government sets out clear tax legislation and then applies those rules fairly and consistently so tax-payers can make commercial decisions with confidence of the tax consequences.
Which aspect of tax would you nominate for a silliest tax rule award?
Not so much a rule but the reaction of certain politicians as to WHO uses/benefits the tax reliefs – when they are working exactly as planned.
To illustrate Enterprise Zone Allowances (EZAs) or Business Premises Renovation Allowances (PBRAs) gave 100% relief to encourage deprived areas to be regenerated and be brought back into economic use – yet if these regeneration projects are funded by footballers or musicians some politicians focus on them gaining 100% tax relief on their high incomes – criticising them as tax dodgers – when they have facilitated the essential regeneration of thousands of these projects and areas across the country – as the tax relief was designed to do!
What is your top tax tip for general practitioners?
I have two tips:
- To recognise that few people are ‘Jack of All Trades’ and thus an independent Property Tax Specialist can add considerable value, saving time, effort, anxiety, reducing risk and saving money!
- Beware false economy – good advice is worth paying for – as robust, comprehensive and cost effective.
If you hadn’t gone into tax what would you like to be doing now?
Farming or an artist… but one or both of these may still feature in my next career move?!
What do you enjoy doing in your spare time – away from the world of tax?
Spending time with family and friends – often cooking (and then eating) – from cakes and biscuits through to full multi-course dinner parties!