An importer and distributer called on KPMG’s tax services when the company was looking to build £7 million warehousing facilities at a new site. Getting our specialists involved from the start brought two big advantages.
First, we were able to give a good idea of what tax reliefs the company could expect, enabling it to construct a robust cost model for their budgeting and cash flow purposes.
But, perhaps more importantly, our capital allowances team was able to flag where enhanced capital allowances might be available. This helped steer the design and procurement decisions so the client could take advantage of accelerated allowances where possible.
Companies commissioning a new building understand the advantages of making the building as energy efficient as possible; generally buildings with a higher BREEAM rating are cheaper to occupy in terms of reduced fuel bills.
However, just because a building meets the BREEAM requirements does not necessarily mean that it also qualifies for enhanced capital allowances. The tax rules differ from the construction rules – which is why having tax experts to hand when planning the construction is so important, especially in major projects like this one.
In this case, we made the client aware of the different tax requirements early on, making sure that the contractor provided all the information necessary so that the client could make informed decisions about the project and the optimal reliefs that could be claimed. The main areas in which the enhanced reliefs were found were air conditioning systems and lighting – both significant investments on any new site.
Being involved from the start also enabled the construction specialists on our team to work alongside the contractors during the project, making sure relevant questions were raised at the right information to help the client make the best choices. We were able to assist with the delivery, getting the right information at appropriate times to secure reliefs.
The net result of our involvement was that we £2m of qualifying expenditure within the construction costs, including £150K of expenditure on energy efficient lighting qualifying for enhanced relief, making a decent dent in the up-front finance needed for the construction.
Our involvement also bought the client peace of mind. We helped the client with this element of the project, freeing up time that they would otherwise have had to spend liaising with the contractors. And at the end of the project, as is our standard practice, we produced detailed and robust reports that are designed to be sent to HMRC with the tax return to show the exact basis on which the different types of capital allowances have been claimed. These can prove invaluable in the case of any future HMRC enquiry or if the company becomes the subject of due diligence.