Good news for commercial landlords

Francesca Hutcheson, tax director at Dyke Yaxley Chartered Accountants in Shrewsbury and Telford, said the good news followed a change of heart from the Government.

“The enhanced Capital Allowances policy was announced in Chancellor Rishi Sunak’s Spring Budget as part of the Government’s drive to encourage firms to take risks and unlock some of the capital they may have built up during the Covid pandemic.

“But the new rules, that will apply for the next two years, originally only covered companies spending on new plant and machinery, while commercial landlords were specifically excluded.

“Now, following pressure from the tax and property professions, the Government has announced a welcome U-turn, which is great news for landlords of commercial properties.”

Francesca said after the change in the rules, 'background' plant and machinery in a let property was now eligible for either the 'super deduction' or the enhanced First Year Allowance, depending on the nature of the underlying asset.

“Background plant and machinery includes items installed in buildings that have the sole purpose of making the building useable. So most expenditure on integral features such as heating, lighting, electrical systems, and lifts, or items like sprinkler systems, blinds and moveable partitions will now be eligible for the enhanced tax relief.

“We’re very pleased to see the rules have been changed and that commercial landlords can now take up the additional help. It’s a move that levels up the situation and is a welcome relief after such a difficult and challenging year for everyone.”

Francesca said where assets qualify for the super deduction this was almost the same effective rate of relief for big businesses when the main rate of Corporation Tax increases to 25 per cent from April 2023 – assuming there is no extension to the planned two-year time limit.

And where assets don’t qualify for the super deduction, they may now be eligible for a 50 per cent First Year Allowance to accelerate any tax relief on their investment.

But she warned that smaller businesses with lower profits could be better off by bringing their spending plans forward in order to make the most of the deduction criteria.

“Commercial landlords who may be unsure of their eligibility for the new tax benefit should seek expert advice before they take any action as the criteria is very specific,” said Francesca.