Capital allowances

Each year millions of pounds of tax allowances and reliefs go unclaimed.

Tax issues are often overlooked or considered at a late stage in property transactions, but when the full suite of options for tax allowances are used proactively they can secure significant savings from acquisitions, disposals, developments and brown field remediations.

For many tax is a consequence, rather than a strategy. Working alongside our clients to deeply understand their circumstances we leverage tax reliefs to positively shape property strategies; maximising your potential, opportunities and savings across property transactions and developments.

We understand that commercial business drivers will always dominate property development and investment, but if tax allowances and reliefs are used strategically they can significantly enhance returns. Our experience means that we know where to introduce and implement tax allowance strategies for maximum effect.

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Construction claim assessment

Capital Allowances is a technical and specialist activity that requires an optimal blend of knowledge, experience, and attitude.

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Our services are provided by senior advisers that have performed at the highest level across a variety of service platforms. Accounting, surveying and property consultancy experience blends together a considered and mature approach to claim solutions. We assume a thorough approach is required in all client requests but wherever possible we adopt simple, clear and disclosed services.

We believe capital allowances are an essential aspect in any project armoury and an invaluable value engineering tool. The inclusion of capital allowances estimates to project viability, feasibility, and financial modelling studies is paramount to enable our clients to fully consider project scope and returns. Maximising capital allowances then becomes an intrinsic project element, providing confidence to clients, and all stakeholders and interested parties.

Having a range of understanding through plant and machinery allowances, general plant, integral features, super deductions and first year allowances, structure and buildings allowances, contributions, grants, repairs, etc requires a holistic experienced approach to evaluate the best approach required.

Strategic acquisition advice

Our consultants have 20 plus years of advising on large and complex transactions through proactive planning and negotiation.

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Best practice and a high level of understanding underpin capital allowances transaction strategies, whether in selling or buying scenarios. Adopting a bespoke forward-thinking strategy establishes a competitive advantage over the opposing transacting parties, and in this respect capital allowances is no different to client investment and negotiation advice. A little proactive planning using foresight and judgement goes a long way to providing knowledgeable and maximised tax outcomes.

The building fixtures environment has evolved many times over the last 20-30 years, with finally, in the last 5 years at least, HMRC achieving a greater level of control and transparency. Significant opportunities remain however, for both sellers and buyers through an understanding of seller structure and positioning, protection and creative use of allowances both unidentified or identified, or knowing the right information required at the right time out with the standard CPSE enquiries. The key to success is in engaging the right expert early.

Sectorising allowances

All industry sectors are unique but require a tailored and transferable approach of core disciplines.

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Our cross trained senior surveying and tax experts have a unique set of skills which are required to assess, evaluate, review and document optimised capital allowances claims for our clients. We believe that core capabilities are essential to maximise savings in all industry sectors including offices, hotels and leisure, healthcare, manufacturing and so on. Whilst some industries require a more truly specialised approach such as the water industry or previously sports stadia and grounds (safety at work), we are also firm advocates of establishing expert knowledge in our client sectors.

Years of experience in listening to our clients business ideas and aspirations has taught us where best to place our focus in building strategies to increase allowances and savings. Existing building alterations may throw up a high degree of incidental assets, hotel projects will include a significant amount of embellishments and finishes, and healthcare builds will contain a high incidence of protective and clean assets. We listen, we learn, and we understand to how best develop our services to serve our individual clients.

Land remediation relief

An extremely rewarding tax relief that necessitates a highly specialised level of qualitative due diligence.

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Capital allowances advice requires a good degree of technical due diligence and entitlement considerations, and a high focus on analytical cost skills. However, the extremely valuable land remediation relief requires an opposing approach. To secure this relief It is fundamentally important to carry out a thorough understanding and review of all relevant client, transaction, property, environmental considerations, remediation strategy, and relevant costs to advise clients property. Failure to do so could be very costly.

A full review of this tax relief by HMRC several years back resulted in higher levels of legislative entitlement to focus the financial benefit where previously intended. Robust due diligence is key and must be enacted with the both the client’s and project consultant’s assistance to enable full disclosure of all relevant case facts. Our consultants are highly motivated to ensuring all client’s take advantage of this valuable project saving but with the correct, detailed approach.

Key capital allowances contacts

News and updates

South East office activity dominated by flight to quality and appetite for ESG-led stock

South East office activity dominated by flight to quality and appetite for ESG-led stock May 11, 2022

Avison Young releases latest South East Offices analysis.

Avison Young has released its latest quarterly South East update, which focuses on performance of the 10 key office markets in the south east of the UK.

Take-up highlights across SE 10 in Q1 2022

  • Q1 take up across our 10 key towns was 313,790 sq ft, a decrease of c.25% on the same period last year.
  • Town Centre 127,752 sq ft, Out of Town 186,034 sq ft
  • Grade A 207,448 sq ft, Grade B 106,338
  • Headline rents average £36.50 per sq ft

Piers Leigh, Principal South East Offices, Avison Young, said:
“Despite lower levels of take-up, rents have continued to increase in most markets, driven by a flight to quality, with over 80% of transactions taking place on Grade A new or refurbished space. With demand for buildings with strong ESG credentials - and associated costs of providing these buildings - growing, we expect rental levels to continue their trajectory.”

Occupier market

Despite last remaining Covid restrictions in the UK having been lifted in Q1 2022, take up figures across the region evidenced a slower start to the year.

With office occupancy still below pre-Covid levels and with increasing build cost inflation beginning to bite, a number of occupiers have delayed making long-term decisions, resulting in lower than anticipated levels of demand. Q1 take up across the 10 key SE towns was 313,790 sq ft, a decrease of c.25% on the same period last year.

Where transactions have taken place, this has largely been on Grade A space with good ESG credentials, resulting in a number of record rents being set. Despite lower levels of take-up, the flight to quality, a limited supply pipeline and a rapid rise in build costs, means that rents are likely to continue to increase, with £40+ becoming common for the best space across the region.

Key South East office occupational transactions in Q1 2022

  • Ultra Electronics agreed to pre-let 56,000 sq ft at Foundation Park in Maidenhead on a 20-year lease with a 15-year break, at a rent of £35.75 per sq ft.
  • Bramble Energy took 33,000 sq ft at Atrium Court on a 10-year lease, at a rent of £15.00 per sq ft.
  • HM Courts & Tribunal Services purchased the 25,980 sq ft Carbon Building for £460 per sq ft (circa £12m).
  • Crawley Borough Council have purchased the 24,000 sq ft Travel House on Manor Royal, Gatwick, from BMO which included the surrender of the remainder of TUI’s lease.

Investment market

Following a busy end to 2021, it was perhaps no surprise to see a slightly more subdued Q1 2022 with £507m transacted across 35 deals.

Post Covid-19, the office market is still in a state of flux. However, as we see occupancy increase – albeit gradually - investors are looking for opportunities to re-position assets to provide better quality office environments with strong ESG credentials, with clear evidence of the advantages of doing so already seen in the occupier market. Ongoing uncertainty has also created opportunities for active property companies and overseas investors to acquire good quality assets at an attractive level compared to other sectors, as pricing for shorter income assets, sub 5 years, has remained fairly low - Palace Capital’s acquisition of 22 Market Street, Maidenhead being a good example.

The quarter also saw significant activity for repurposing opportunities. Over 40% of deals are earmarked for conversion to residential or industrial use. In strategic locations, industrial land values continue to be higher than residential land, with strong levels of demand in the sector continuing. Fundamentally, the occupier market is not substantially oversupplied and any further squeeze on availability in the market should see pressure rising on rental levels.

Key South East office investment transactions in Q1 2022

  • Waterside House, Bracknell. 94,867 sq ft - Price: £57m, Purchaser: Keppel DC REIT – Vendor: Fiera
  • Weybridge Business Park, Addlestone. 147,000 sq ft – Price: £55m, Purchaser: Bridge Industrial – Vendor: abrdn
  • Trinity House, 1000 John Smith Drive, Oxford. 28,695 sq ft – Price: £41m, Purchaser: Tishman Speyer Properties – Vendor: Devonshire Commercial Lateral Partners
  • 22 Market Street, Maidenhead. 22,586 sq ft – Price: £10.25m, Purchaser: Palace Capital – Vendor: Clearbell

Avison Young’s quarterly South East office update focuses on 10 key markets, made up of in town and out of town markets, covering the whole of the south east geographical area (Cambridge; Milton Keynes; Oxford; Basingstoke; Reading; Maidenhead; Slough; Crawley; Guildford, Woking & Weybridge; and Watford).

To read the full research update on South East offices, click here.

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