Research by the Law Society and Catax Solutions has found that conveyancingtake an inconsistent approach towards capital allowances, leaving them open to risks ranging from loss of income to client complaints and litigation.
The research estimated that £1.6 billion in capital allowances went unclaimed between 1st April and 31st December, 2014. The research concluded that if conveyancing solicitors play a key role in securing allowances for clients under new legislation, law firms could potentially benefit from capital allowances in many ways.
Investigating the impact of legislation, [Finance Act, 2014] that came into force last year, in particular its effect on transactions and the extent to which solicitors are compliant, this research concluded that solicitors have scope to pick up the pace on capital allowances for the benefit of both their firm and their clients.
Capital allowances are available to any business incurring capital expenditure from buying commercial property.
ommercial property owners are entitled to a tax relief in the form of capital allowances on qualifying items. Solicitors have been obliged to raise the issue of capital allowances relief since April 2014, and have a duty to provide advice to clients on capital allowances.
Although the full Capital Allowances report is available on line, the headline findings were:
- Seventy per cent of solicitors would like to know more about capital allowances. In particular, not all solicitors realise their duty of care towards clients and many see capital allowances as an issue for accountants.
- Those solicitors who embrace capital allowances relief can expect it to position them as trusted advisors, drive increased customer satisfaction and be lucrative for both themselves and their clients.
- Although 53% of respondents predicted a growth in transaction volume over the next 12 months, those who were more complacent about capital allowances were more likely to expect a slowing growth rate in the future.
Commenting on the report, Ian White, chair of the Law Society’sSection committee, said:
“To a large extent this recent research confirms what the profession has always known, namely that our understanding of capital allowances has been sadly lacking. We should take steps to ensure that we are advising our clients fully and properly in these areas, and that clients, and ourselves as practitioners, benefit from ensuring best practice. The Property Section is committed to ensuring that the education which the research shows to be necessary is promoted and that this important area of our work is highlighted.”
Mark Tighe, managing director at capital allowances specialists Catax Solutions, added:
“There is no doubt that there is an acute need for a greater awareness of this complex tax area, and in particular its effect on transactions and the extent to which solicitors are compliant.”
“Solicitors have a specialist role just as GPs have a duty of care towards their patients. As the legal counsel, a solicitor plays a pivotal role in guiding a client when intending to buy or sell a commercial property. This means the solicitor has a duty to be aware of capital allowances. Remaining silent, and failing to alert clients of these new rules, could certainly bring their professionalism at disrepute.”