Office-to-resi conversions could lose owners £72m in tax relief

Catax Solutions, an endorsed partner to The Law Society and ICAEW, warned the lack of understanding surrounding capital allowances will see the value of lost tax relief rise even further following the announcement by Housing and Planning Minister, Brandon Lewis, that so-called ‘permitted development rights’ will now be made permanent in an effort to boost housing supply.

Capital allowances are a form of tax relief available to anyone incurring capital expenditure when building, buying, or refitting commercial property. They can be claimed against the ‘intrinsic fabrication’ within a building, from lighting fixtures, sprinkler systems and air-conditioning units to heating systems, fire alarms and lifts.

Based on the £500m+ of tax relief Catax Solutions has secured for over 7,000 clients, nine in 10 commercial property owners have not made a capital allowances claim due to a lack of awareness.

However, if a claim isn’t made before, or at, the point at which a commercial property is sold or converted to a residential building (thus losing its commercial property status), then the valuable tax relief available could be lost forever.

Mark Tighe, Managing Director, Catax Solutions, commented:

“Capital allowances can be complex, so it’s important the message here is a simple one: if you are considering converting a commercial property into a residential one, or selling it onto a residential developer, then you need to make a capital allowances claim before or at the point of sale or before work begins. If you don’t, you will instantly lose potentially tens or even hundreds of thousands of pounds of tax relief. Given the current housing shortfall, relaxing the planning rules to allow more office-to-resi conversions make sense but it doesn’t make sense for commercial property owners to not receive the tax relief that is their right by law. But if they rush into converting property without making a claim, this is exactly what could happen.”