Page 28 - PWM2024_September Ebook

TECHNOLOGY REPORT

Avoid tax traps

B to wait until you sell the premises to get tax relief for the
ut beyond that all premises, from time to time,
need ongoing repairs and maintenance which
costs of any additions or improvements.
To this Tim Beresford, director of capital allowance
clearly comes at a cost.
Premises are essential Tax should never be the driver behind any specialists, The CA4 Partnership, explains that if an item
to a printer’s success. commercial decision. However, that does is treated as a repair, and is expensed through the compa-
not mean businesses cannot use the tax sys-
ny’s P&L account, then “it must be claimed as an expense
Not only do they tem to lower the impact of costs that were going to be in the year of expenditure rather than a future year”.
have to be in the right spent anyway. And to illustrate just how complex tax law can be, and
location, but they This makes it particularly important to understand the that when it comes to property the lines can get blurred,
need to have that tax implications of spending because the law makes very he gives an example: replacing a boiler which is part of a
clear distinctions between ‘improvements,’ ‘alterations’
larger heating system. “The boiler,” he says, “is just one
‘Goldilocks’ element and ‘renovations’ in terms of how claims for relief are part of the larger heating system and so would be consid-
to them – not to be so treated by HMRC. ered a repair of that larger asset.”
large so as to cost For David Wright, a technical officer at the Association He says that a distinction is drawn based on whether
more than necessary, of Taxation Technicians, the pivotal question for tax is something is repaired, or whether there is an improve-
ment or alteration to the asset or larger asset, the whole
whether money spent on the premises is revenue or capi-
but large enough to tal expenditure. As he outlines: “The costs of ongoing heating system in this example. So although the whole
cope with expansion repairs and maintenance will normally be revenue, mean- boiler is being replaced, the work would be considered a
if needs be. ing they’re fully deductible in the period incurred, and the repair since the boiler forms part of a larger system.
business benefits from tax relief relatively quickly.
“In contrast, if you build, extend, or make improve- Revenue or capital?
Words by ments to your premises, the money spent is classed as In principle, Wright says that the distinction between
Adam Bernstein capital expenditure.” This means, as he explains, that revenue and capital expenditure should be simple: work
unless you can claim capital allowances, no tax relief is done to return premises to the condition they were in at
available upfront for capital expenditure; you’ll also have acquisition is revenue while expenditure on enhancing

26 PrintWeek MENA September 2024 www.printweekmena.com