Valuable Tax Relief when incurring Premises expenditure!!!

Mitigating tax liabilities is an important aspect for any tax payer, but it is little known that incurring expenditure on purchasing, refurbishing or constructing surgery premises can give rise to substantial tax relief.

Just consider these general facts -

Purchasing your current surgery premises from the PCT could result in about 20% of the purchase price being tax deductible. For example, say you purchase your existing premises from the PCT for £1m, which will mean about £80,000 of tax savings will be available to a personal 40% tax payer.

Refurbishing existing premises, which involves cost associated with renewal of building systems and fit outs can often be as much as 75% becoming tax deductible.

Constructing new premises can be in the region of 30% -45% of the construction costs becoming tax deductible. For example a £1.5m build programme produces say £450,000 in capital allowances and at a 40% tax rate this equates to a personal tax saving of £180,000.

The tax savings are given over a period of time, but utilising any qualifying energy efficient and water saving technologies in the build specification will provide 100% tax relief in the first year.

The legislation which determines this relief is the Capital Allowances Act 2001, which over the years has been amended, but the value of providing tax relief for capital expenditure is something that can be very significant and not to be ignored.

In addition where new premises are being built there is also the potential to recover a percentage of the VAT.

Of course you would not expect this to be an easy win and a key problem surrounding Capital Allowances is lack of knowledge. In general, tax relief is not well understood by many in the construction industry, and specific surveying and construction expertise, with a thorough understanding of the legislation, is necessary to maximise the allowances. Some accountants will pick this up and bring in the relevant expertise, but there are many that are unaware of the different skills base required to analyse construction cost data and will likely not claim all that can be.

Those GP’s considering the amalgamation of practices into larger new premises, or indeed maybe going it alone, the process of getting PCT approval, bank funding, build design and construction, and all the legal aspects is quite a daunting prospect. But do not despair there is considerable expertise available to help smooth the path, and together with the substantial tax relief available the overall financial commitment may not be as burdensome as first thought.

Oh, by the way any past expenditure can also potentially uncover unclaimed tax relief.

Further discussion can be directed to Derek Hussey at Davis Langdon
on 07971 436284. Davis Langdon is a long established Property Tax and Cost Consultancy operating throughout the UK and Internationally.

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