On Friday 8 May, we woke up to the news that the Tories had earned a parliamentary majority for the first time since 1992 and this truly dispelled pollster predictions. But their shock victory has been welcomed widely from the business community.
In the lead up to the general election, David Cameron identified SMEs as the growth engines of the UK economy, receiving unanimous support among small business owners.
However, the prime minister now needs to go beyond rhetoric and set out his plans on how to support them and simplifying the tax benefits available to them, such as capital allowances tax relief, is one place to start.
Small firms need tax boosts that are easy to claim if they are going to play an integral role in driving the countrys economic recovery.
I have no doubt that most business owners will agree that the current capital allowances system is unnecessarily over-complicated and, as a result, UK businesses do not have the support they need to invest and flourish.
And for those who dont know a great deal about capital allowances, theyre a form of tax relief that can be claimed by commercial property owners who incur capital expenditure when building, buying or refitting a property or properties.
Provided you’re a UK taxpayer, and you own a commercial property, you may be entitled to this form of tax relief.
We have been digging into some numbers and an alarming number of commercial property owners are failing to claim capital allowances. So much so that those who could have reaped the benefits of them have lost potentially a staggering 2.1bn since April 2014 that works out at 8m a day. Are you feeling the burn on your wallet
So what can the Conservatives do to help these businesses Well, a good starting point would be to simplify the way capital allowances are claimed.
Firstly, it is vital one person is made responsible for ensuring this valuable tax relief is claimed. Should it be the property agent The lawyer Or, the accountant At the moment, the responsibility is not the sole preserve of anyone in particular and this causes problems.
If I had a pound for every time I have heard my accountant will sort it out , I would be sitting on my own island in the tropics, escaping the unpredictable British climate.
While most accountants are aware of capital allowances, their knowledge is superficial, as they arent fully trained to understand all the intricacies. As a result, they do not have the expertise to pick out certain pockets of expenditure on property that qualify for this relief.
And since their clients arent experts either, they arent in a position to verify whether the allowances they are entitled to have been fully claimed. This is why working with a specialist is crucial and instructing one at the earliest opportunity is vital.
Whoever is given that responsibility should also ensure that the property owner doesnt begin any refurbishment work before an assessment has been undertaken.
It is worth noting here that capital allowances can be claimed against original items and then against new items once theyre replaced. If you plan to renovate a property, it’s crucial that a capital allowances assessment has taken place before work begins to ensure that maximum benefit can be gained both before and after completion.
Another recommendation would be to restructure capital allowances so they are relieved at different rates for SMEs and larger companies. Similar to the structure for Research & Development relief (R&D), this is a simpler and fairer way of distributing the tax.
The Tories election pledges to slash the red tape and increase the number of startups to 600,000 by 2020 were promises guaranteed to get the business community on side.
To allow them to genuinely grow and fulfil their role as the UK economys growth engines, the new government needs to pay heed to the tax reliefs that are already due to UK businesses under UK law but which, all too often, arent being exploited.
Mark Tighe is the managing director of capital allowances specialist Catax Solutions.