Tax Depreciation - case studies
These case studies outline just some of the issues we help our clients with. If you would like to find out more about any of these issues or would like to discuss how we can help you, please contact our group partner, Peter Millwood.
Hotel Owner (£1 million cash gain)
We revisited hotel refurbishment expenditure incurred from 2003 to 2006 and reclassified £1.3 million of hotel buildings expenditure to capitalised revenue and £2.9 million of hotel buildings to plant and machinery. Not only were the tax deductions accelerated, but a permanent loss of tax relief was avoided. Total tax savings identified were in the region of £1 million. We managed all aspects of the project working directly with the refurbishment project surveyors, thereby minimising our client’s workload.
Major Energy provider (£2 million cash gain)
We reviewed expenditure on the construction of an extension to a major power plant. Given the multi-contract nature of the project and limited construction information, we worked directly with the project team and contractors and undertook a thorough survey of the facility to identify over 85% of expenditure as main pool plan and machinery, avoiding the impact of the long-life assets legislation. This enabled our client to maximise tax relief on their expenditure at the earliest opportunity and bring forward reductions in their corporate tax liability.
High Street retail group (£10 million cash gain)
We carried out a retrospective review of expenditure incurred from 2002 to 2008. As is common in the retail sector, our client had vastly underclaimed capitalised revenue deductions. Our retrospective review identified additional qualifying expenditure equivalent to a total cash tax saving of £10 million and generated a tax repayment from HMRC. We went on to develop an automated process for the categorisation of future capital expenditure to maximise allowances.
Enhanced capital allowances
We were engaged by a national supermarket chain to review opportunities for claiming Enhanced Capital Allowances (ECA) across the store portfolio. We developed a methodology for identifying qualifying ECA expenditure which resulted in approximately £25 million of eligible ECA expenditure per annum. The engagement resulted in significant accelerated tax deductions which decreased the net present value cost of the asset by up to 10%.