Baker Tilly’s Steve Carter on how law firms could claw back tax on property
AT A time when so many law firms are looking to improve their cash flow, I find it surprising many have not looked to maximise the tax relief available on what is often their single biggest capital asset – their property.
The tax relief is available in the form of capital allowances and it enables businesses, such as law firms, to deduct an appropriate proportion of the cost of the property against their taxable profits.
Much of the problem relates to a number of misconceptions and complexities surrounding which items within a property can be included and which ones can’t.
It is certainly an area where specialist advice is required and a valid claim can amount to a substantial proportion of the total cost of the property.
Many law firms also assume that, once the building is constructed, the opportunity for making the claim disappears.
This certainly isn’t the case because, as long as the asset is in use, claiming the relief, and a tax refund, is still possible.
For firms that have renovated an existing building, or where tenants have incurred fit-out costs, the tax claw back can be significant.
It’s almost never too late to claim and I’d urge all law firms to look closely at this issue. It’s an extremely effective way in which to save tax and can provide a welcome boost to cash flow during a very challenging period.
