Revenue Tax Relief (RTR)
UK Accounting Principles determine that many more traditional repair and maintenance type asset costs are capitalised than ever before. Identifying this expenditure and treating it as a legitimate deduction from profits for tax purposes can bring significant cost savings on seemingly lost tax relief.
Issue
In recent years, accounting and taxation principles have been moving ever closer. As more expenditure becomes capitalised, HMRC are moving towards a system of depreciation based tax relief. As a result, the perceived ‘automatic’ tax relief received for ‘accounting revenue’ expenditure now needs to be detailed and considered separately for tax purposes. This is a very subjective and complex area, where there have been minimal claims – most of which have been inaccurate and incorrect.
Relief
RTR is available to all tax payers who have relevant capitalised repair and maintenance type costs. The relief is available as a deduction from profits in line with the relevant depreciation policy and can represent additional cash savings of as much as 25% of cost on a typical refurbishment project.
Detail
The relief is available to all taxpayers who incur relevant expenditure for the purposes of their trade. It is only available for genuine repairs, so needs detailed analysis for each work stream undertaken. It’s also imperative to differentiate between entire and part assets (ie. entire assets which are replaced may not qualify; for example, a replaced property extension). The relief is heavily dependant on the interpretation of relevant case law; as such, detailed and fully disclosed analyses are required to support a claim.
Approach
We are a team of tax qualified property professionals with senior level experience at the Big 4 Accountancy firms. As a result, we understand the development issues, and all the tax and accounting aspects of construction projects. We are specialists who can work alongside your own tax and project advisers. Offering a complete service, we can undertake feasibility and entitlement reviews through to claim preparation and securing the best possible claims with HMRC.
Opportunities
- At pre-contract stage, schedule of works can be enhanced to support a claim.
- Depreciation policies can be reviewed for significant refurbishment programmes.
- Percentage agreements can be sought with HMRC on similar types of expenditure.
- Claims may be made on expenditure incurred following an acquisition.
Example
An investor incurring capital expenditure of £500,000 on retail refurbishment:
| Refurbishment expenditure |
£500,000 |
| Expenditure qualifying for Revenue relief (say
50%) |
£250,000 |
Overall tax saved through relief
(at 23% large
companies rate) |
£57,500 |
12% cash saving
= £57,500 |