Insights

In our most recent blog updating readers about changes to the capital allowances rules, we highlighted the availability of additional tax relief for regenerating commercial property.

According to this legislation, businesses operating in six selected enterprise zones are eligible to qualify for 100% First Year Allowances on plant and machinery investment incurred between April 2012 and March 2017. The relief is available to commercial property owners when completing conversion or renovation works to disused commercial premises. Qualifying regions are typically located in economically disadvantaged areas or cities that were targeted by the Government for urban regeneration, for example, Glasgow or Liverpool.

Recently, as part of its anti avoidance activity, HMRC has begun investigating certain property investment schemes which it argues were established to misuse the tax relief opportunities offered by this legislation. Famous sports celebrities including Sir Steve Redgrave have been named as being affected and could face large retrospective tax bills.

According to HMRC, some property investment schemes unfairly exploited the incentives designed to improve run-down city centres and used them mainly to obtain tax relief. It said they “exhibited some features that have been part of avoidance schemes that HMRC has challenged in the past.” Members of the schemes suspected of abuse have been issued with accelerated payment notices (APNs) to repay tax relief claimed on the investments. In some cases the amounts involved exceed hundreds of thousands of pounds.

Accelerated payment notices are being used by HMRC to recoup £7.1bn of tax which is viewed as unpaid and outstanding from a wide range of taxpayers involved in a wide array of tax planning initiatives. Many of these individuals have become involved in investment schemes which HMRC regards as examples of aggressive tax avoidance. Our advice to clients is to avoid any commercial structures or investment schemes designed to provide tax relief on the basis that ‘if it seems too good to be true, it probably is (as far as HMRC is concerned)!”

For advice on tax planning strategies that will not be regarded by HMRC as aggressive, please contact Lesley Stalker by emailing las@rjp.co.uk