Plant & Machinery Allowances (PMAs)
New Build/Refurbishment
PMAs are the main form of tax relief available on new construction, refurbishment and fit-out expenditure. Effective advice and planning around these allowances can significantly reduce the overall project expenditure and increase its viability.
Issue
Property owners and developers are always looking to maximise the return on their developments. But, property and tax advisers and/or departments who don’t act together can often hamper this to the detriment of the overall project. Quantifying and maximising the amount of relief available is a skilled, specialist and time consuming process. Each year, businesses lose significant value by not claiming capital allowances, under claiming and/or not claiming the relief sufficiently early.
Relief
PMAs are one of a series of reliefs which include Enhanced Capital Allowances, Integral Features Allowances and Long and Short Life Assets. PMAs relief are a deduction from profits but can easily be matched against capital expenditure; this relief can represent a cash saving of up to 18% on construction/fit-out/refurbishment costs.
Approach
We are a team of tax qualified property professionals with senior level experience at the Big 4 Accountancy firms. As a result, we understand the development issues, and all the tax and accounting aspects of construction projects. We are specialists who can work alongside your own tax and project advisers. Offering a complete service, we can undertake feasibility and entitlement reviews through to claim preparation and securing the best possible claims with HMRC.
Detail
Capital Allowances are available to businesses that incur capital expenditure for the purposes of their trade. The relief rate differs according to the type of allowance. Generally, applicants must ‘own’ an asset to make a successful claim. Claimed through the tax computation, the relief is given over a number of years.
Opportunities
- Including tax savings in feasibility estimates and cost plans can secure greater project returns; significantly increasing project viability and enhancing build parameters and specification.
- Capital Allowances planning during detailed design can increase the relief available by including tax qualifying assets and energy efficient designs.
- Tax planning whilst negotiating over contributions and grants can increase cash savings by as much as 18% of the contribution and grant value.
- Establishing a claim negotiation strategy and risk profile at the outset provides greater claim certainty and smoothes the claim agreement process.
Example
A tenant fitting out office premises that incurs capital expenditure of £2,000,000:
| Refurbishment expenditure |
£2,000,000 |
| PMAs including Integral Features (Say 70%) |
£1,400,000 |
Overall tax saved through relief received at varying rates
(at 23% large companies tax rate) |
£322,000 |
16% cash saving = £322,000 |