It never ceases to amaze me how tax can often be an afterthought in construction projects – left as something to be worked out by the client and their advisors later on. But this shouldn’t be the case. Not only does this make it much more difficult to quantify the level of tax reliefs available; in many cases subtle changes to the project at an early stage could have resulted in significant net of tax cost savings.
This is particularly true in the case of capital allowances. It can be very difficult after the project has completed to obtain information about the costs of items qualifying for capital allowances. More importantly, changes to the specification could result in more allowances being available; for example, spending slightly more on air conditioning to buy units which are listed on the “energy technology list” could result in 100% allowances being available, giving a lower net of tax cost.
Issues can also arise in major refurbishment projects; where is the cut-off point between tax deductible revenue repairs, and capital improvements works which may attract tax reliefs only slowly if at all? It is easier to identify this at the start of the project, and again, small changes could result in more expenditure qualifying as repairs.
In terms of VAT, problems tend to occur more frequently in respect of residential property, and it often seems to be the customer who has to explain to the contractor that certain reliefs should be due. Unfortunately it can be impossible for the customer to claim VAT back if too much has been charged, so it must be done right from the start. The myriad of legislation concerning when the lower rates of VAT can be applied is hard to navigate, and it is understandable how opportunities for savings can be missed.
For those in the industry (builders, architects, quantity surveyors etc), If you can understand the tax issues facing your clients and save them money overall, then you must be able to use this to gain the edge over your competitors in the tender process. On the other hand, if you are contemplating commissioning a building project, you will also want to understand how to minimise your tax costs.
To this end we are running a series of seminars to introduce these issues, and give you that competitive edge. For more information please visit www.ensors.co.uk/events