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Recent tribunal triggers debate over capital allowances

Sunil Sharma

Commercial property firms are being urged to ensure their capital allowance provisions are in order after a tribunal sparked a debate over claims.

A recent case between Scotland's Dundas Heritable Limited and HMRC saw HMRC argues the taxpayer was not entitled to claim capital allowances in its corporation tax return for being too late, albeit they would be able to claim in subsequent years.

Sunil Sharma, head of capital allowances at Moore, explains: "Despite some practitioners suggesting capital allowances could be lost if not submitted for the first accounting period in which the expenditure was incurred, there is in fact no time bar to claiming capital allowances in any subsequent tax year, so long as the asset is still in use and the claimant is still undertaking a qualifying activity.

"However it was commonly accepted that only the previous two tax years could be amended to reclaim tax paid.

"There seems to be a contradiction in the legislation where a late claim can be validated due to the self-assessment provisions which will deem a claim to be valid unless HMRC decided to open an enquiry, which in turn validates the claim."

Stating "the law is clear", the judge in the Dundas Heritable Limited v HMRC case found in favour of the taxpayer, however Moore believes the result is not something HMRC will easily accept.

Sharma adds: "In answer to the question of 'when is late not late enough?', it's only too late to claim if and when a property has been bought or sold without the relevant capital allowances provisions in the agreement.

If you'd like to discuss your capital allowance needs, please contact our key people.