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Tax reliefs: There may be more than you think

27 April 2010

There are a number of lesser known tax reliefs which can provide businesses with valuable savings. We consider some of them below.

Energy-saving and environmentally beneficial plant and machinery

If a business has to purchase certain plant and machinery, for example boilers, lighting, refrigeration equipment, pipework insulation, or plant and machinery which provides sustainable water use, enhanced capital allowances entitling the business to a deduction of 100% of the expenditure on such items can be claimed. The expenditure must be on items which meet strict energy-saving criteria.

First-year tax credits

If businesses incur expenditure on the assets referred to above but do not make profits against which the deduction can be set-off then this would not give rise to an immediate tax saving. To ensure there is an immediate saving, loss-making businesses can surrender tax losses relating to such expenditure to HM Revenue & Customs (HMRC).

In exchange, HMRC will give a tax credit of 19% of the amount surrendered, subject to a limit of the higher of (i) the total PAYE and NIC liability of the company for the year, and (ii) £250,000.

Hotel construction costs

For businesses involved in the construction of hotels, it may be possible to claim industrial buildings allowances (IBAs) despite IBAs generally only being available on industrial buildings.

Providing certain criteria are met, including that the hotel has ten or more bedrooms, the construction costs of a hotel can also qualify for IBAs. However, any potential claims should be looked at urgently as IBAs are being phased out and will no longer exist from April 2011.

Business premises renovation allowance

Businesses that own premises which have not been in use but which are to be brought back into use can, via first-year capital allowances, claim a 100% deduction of all capital costs incurred in converting or renovating business premises. The properties must be located in designated disadvantaged areas and have been empty for at least a year.

Flat conversion allowances

Providing certain criteria are met a deduction of 100% of any capital expenditure incurred by businesses in renovating or converting vacant or under-used space above commercial premises in order to provide flats for rent can be claimed.

Land remediation relief

If a business has to spend money cleaning up contaminated land they can benefit from an increased deduction of 150% of any expenditure which qualifies as ‘qualifying land remediation expenditure’, broadly, money spent on cleaning up contaminated land.

Business rates relief

If a property owned by a business becomes empty then empty rates relief can be claimed for six months on empty industrial properties (three months for empty commercial properties).

In addition, empty properties with a rateable value of up to £18,000 are exempt from business rates for the 2010/11 tax year. Also, for one year from October 2010, properties with a rateable value of up to £6,000 will pay no business rates with rate relief taper being available for properties with a rateable value of up to £12,000.

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Tom Wilde

Solicitor
T: 03700 86 8713
I: +44 (0)118 965 8713
E: tom.wilde@shoosmiths.co.uk