Maximising Tax Relief on Motor Dealer Properties

Tax relief (also known as ‘capital allowances’) on buying plant and machinery is fairly well understood, but far less appreciated are the capital allowances available on fixtures and fittings included in a building such as a new car showroom. These capital allowances could be available on the construction cost of a new building or on the purchase of a second-hand building.

Very broadly speaking, this includes expenditure on such things as electrics, heating or plumbing, where there is a function involved and the fixture retains a separate identity from the building or structure. This includes air-conditioning, radiators, fire sprinklers, burglar alarms, electronic key access systems, car wash apparatus, compressed air equipment, hoists, thermal insulation, vehicle wash water reclaim units and trunking/cabling. A tax adviser, who understands the background to capital allowances claims, may well be able to identify other costs that will also qualify as fixtures and fittings specific to that building.

Buying a second-hand building is a different matter. The same things will qualify as fixtures and fittings, but the difference is in the fact that the purchaser and seller will often be able to agree a value, as part of the purchase price, that can be attributed to the fixtures and fittings in the building. Clearly this can be the subject of negotiation, as the purchaser may well be looking for a figure as high as possible while the seller will probably be looking for a lower figure. An election will need to be made and signed by both parties and will usually mean that HM Revenue and Customs are bound by that agreement.

A purchaser should make this a priority as, without a signed election at the time of purchase, it could be a very expensive process to try and claim capital allowances. Indeed, if an election is not made within the appropriate time limit, the purchaser may not be entitled to any tax relief in the future.

There are other tax reliefs associated with building works, such as remediation of contaminated land. This could be, for example, removing asbestos from buildings or the removal of Japanese knot weed.

There is also a separate 100% allowance on assets that appear on the government’s Enhance Capital Allowances scheme, for energy saving technologies such as certain boilers or air conditioning units.

This is a very general overview as an introduction to this intricate subject. If you are considering spending money on your properties or have done so in the past, it is always beneficial to take professional advice to maximise your tax relief.

If you have any queries or would like to discuss this in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Motor team.

This article originally appeared on the blog of our member firm, Larking Gowen.

Motor Dealer Report 2016 – Now Available

MHA Motor Dealer Report 2016 ImageOur MHA Motor Dealer Report 2016 shows that the sector is very positive and optimistic about the next 12 months. However, the recent Brexit vote has thrown an element of uncertainty into the mix.

The report looks at Financial Performance Drivers, Future Industry Outlook, Operational Performance Drivers and other elements such as Social Media and Marketing Service Plans.

MHA Report Key Findings:

  • Motor dealers are positive about their year end profitability.
  • Over half of motor dealers believe that new car sales targets are achievable.
  • 46% of motor dealers have noticed a decline in used car margins.
  • Staff retention and staff recruitment are the top two cost areas that motor dealers are expecting to significantly increase in the next 12 months.
  • 87% of motor dealers are intending to recruit in the next 12 months.
  • Over 80% of motor dealers are looking to grow their business over the next 12 months.
  • The majority of motor dealers have planned spend, over the next 12 months, of over £150k.
  • 73% of motor dealers think that AFVs will gain significant market share, with 66% expecting this to happen within the next 10 years.

The full MHA Motor Dealer Report 2016 is now available.

Steve Freeman, Head of the MHA Motor sector comments: “It is good to report that prior to the recent Brexit vote there was a considerable amount of positive news and optimism in the sector, reflecting the level of sales volumes and growth in the last few years and also the considerable strategic activity which has been taking place. A good proportion of dealer groups are continuing to invest in the sector through developing existing sites and/or the acquisition of more franchises, sites or other dealers. Confidence levels have certainly remained strong throughout the first half of the year and the survey demonstrates this.”

Steve went on to say: “The underlying UK car market is clearly strong, but the Brexit uncertainty is very likely to have an adverse impact on the level of buyers changing their cars, as well as other operational uncertainties such as the stability of a dealer’s workforce, funding costs and the resultant level of profitability in the short to medium term. The sector is, however, extremely resilient and so it will be interesting to see how this pans out in the coming months and through the remainder of 2016 and into 2017.”

If you would like to discuss any of the issues raised in this report in more detail or you would like to speak with a member of our team, please contact: 01908 256706.

Autumn Statement – key announcements for the motor industry

Overall the Autumn Statement seemed to be a promising investment for the motor sector. See below for a summary of the key announcements made in George Osbourne’s speech which will impact the industry:

  • Company car tax: the three per cent diesel supplement will be retained in company car tax until 2021, when diesels are expected to meet EU air quality standards.
  • Boost to ultra-low emission vehicles: a further £600 million is to be made available to support the manufacturing of ULEVs. An announcement from the Department for Transport on the plans for the plug-in car grant is expected to be made in due course.
  • Car insurance: ending the right to claim cash compensation for minor whiplash injuries in order to crack down on claims could result in insurance policies falling by an average of 8% in price.
  • Road maintenance: £15.2 billion is to be spent on the Roads Investment Strategy over the next 5 years. A further £250 million is being pledged for a permanent pothole fund along with £5 billion for roads maintenance.
  • Fuel benefit charges: employees in receipt of company-funded fuel will see their benefit-in-kind tax bills rise from April 2016 for private use with the fuel benefit charge multiplier for cars to increase by £100 to £22,200. Between 2015-16 and 2016-17 the van multiplier is increasing by £5 with van benefit-in-kind tax rising by £20.
  • Salary sacrifice: the Government remains concerned about the growth of salary sacrifice and is in the process of gathering evidence of its use to inform what action (if any) they will take.

If you would like to discuss any of these issues in more detail or you would like to speak with a member of our team, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with your local representative.