Capital allowances – a consistent picture of inconsistency? With Nick Dyoss

Following on from our recent research the Law Society, in conjunction with Catax Solutions, have released their findings on capital allowances and the results are almost identical, writes Nick Dyoss of TM Group (pictured right).

When the Law Society asked about the adoption of the new capital allowances legislation 37% of respondents said that they felt it was not the solicitor’s responsibility to establish a position on capital allowances for a given property.

A further 18% did not yet realise that it is the solicitor’s responsibility to do this and have made limited progress in complying with the new legislation.

So, in total, 55% of the poll had an issue with complying with the April 2014 capital allowance practice note.

All of this is very similar to the TM Group research which found that 52% of respondents answered “What Practice Note?” and less than 10% were ‘finding it easy to fulfil their obligations’.

Picking out some of the other points from the Law Society report:

The other consistent theme from the Law Society’s report was that clients are also unaware of capital allowances and the tax relief they can claim, which is backed up with 40% of law firms saying that their client never raises the issue during a transaction.

Is this because clients view capital allowances as a complication that delays matters rather than a benefit, albeit in the longer term?

But it doesn’t have to be like this with the client uninterested and the solicitor failing to comply with legislation; potentially exposing themselves to a negligence claim.

Practical ways of helping your clients with Capital Allowances

Add some wording into the client care letter, maybe the firm could offer some form of assistance to complete Section 32 of the CPSE.1? Certainly it’s a good idea to raise the issue as early as possible in the transaction.

An easy way to help and be able to demonstrate your compliance is to obtain a search.

In the same way you do with the Contaminated Land and Flooding Practice Note, you can order a Capital Allowance Check which can be passed onto the client to help them get underway with some information which they can pass onto their tax advisors.

TM have launched a commercial search at £50 and a residential one at £15 which, with some additional information from the client, can be returned in hours. Simply login to the system to order or contact us to set you up with a account.

The issues associated with capital allowances are not going to go away and nor is the duty that solicitors have to their clients since the April 2014 changes.

The process for determining allowances can be improved quite quickly, with very little upheaval to you or your firm’s existing processes. A few simple steps like the ones above could certainly help both solicitors and clients alike.