A recent survey of the proposed changes on Capital Allowances, organised by leading property tax and finance specialist Davis Langdon Crosher and James, has revealed that nearly 70% of respondents think that the withdrawal of IBA’s (Industrial Building Allowances) will have a negative impact on their businesses.

The survey, which the firm conducted amongst thousands of property owners, occupiers, accountants, surveyors and lawyers, uncovered industry wide concern for the proposed changes, which are currently the subject of an on-going consultation with HM Revenue & Customs.

As part of the reforms, the proposals also include a reduction of the main rate of Capital Allowances to 20% and the introduction of a new 10% rate for integral fixtures as well as changes to the payable Enhanced Capital Allowances (ECA).

When coupled with the withdrawal of Industrial Building Allowances, this will have a particularly negative impact on the hotel sector. The nature of the withdrawal means that assumptions made in investment appraisals for projects are now wrong and businesses are effectively subject to retrospective taxation.

In addition, the survey revealed other facts including:

• 90% of respondents utilise all available Capital Allowances and 65% ‘always’ or ‘sometimes’ factor in their value when appraising new schemes. The proposed changes will potentially disadvantage any business that incurs significant amounts of capital expenditure on real estate.


• The scheme for rewarding investment in environmentally plant and machinery in the form of Enhanced Capital Allowances (ECA’s) appears to be lacking. Over 70% of respondents admitted they had never made a claim for Allowances under the current ECA scheme, There was general support for extending


• current environmental initiatives and incentives although many were sceptical over the effectiveness of the current proposals for treating environmentally beneficial building features as integral fixtures.

“The government needs to take a more holistic approach to energy efficient buildings,” comments xxxxx at Davis Langdon Crosher & James. “It needs to abandon the suggestion of giving Capital Allowances on more specific building features in favour of giving a lower rate of allowance on those buildings that meet the highest standards in terms of energy efficiency and environmental impact. Only 3% of owners and occupiers thought the current proposals to treat environmentally friendly building features as integral fixtures would be effective, and most believed that tax incentives based around the forthcoming Energy Performance of Buildings Directive would be preferable.

“Three quarters believed green incentives of some sort would increase their investment in energy efficient measures but over 90% admitted they would be more likely to invest in energy efficient measures if prospective tenants had this as a priority when taking a lease.”

Davis Langdon Crosher & James is the UK’s leading property taxation and finance consultants. They have analysed over twenty thousand properties and have historically secured tax savings of more than £2 billion on behalf of clients.

Editors Note:
Davis Langdon is a leading international project and cost consultancy, providing managed solutions for clients investing in infrastructure, property and construction, worldwide. The firm has worked on a number of high profile projects including Tate Modern, Royal Festival Hall London and the Eden Project Cornwall. It is the recipient of a number of industry awards including being voted Top International Construction Consultant for fourteen successive years and was named Building magazine’s Construction Consultant/Surveyor of the Year 2007. The firm was named one of the Sunday Times ‘100 Best Companies to Work For’ in this year’s league table, jumping 52 places from 81st to 29th on the list and the only project and cost management consultancy to be included in the top 40. The firm has in excess of 3820 staff in some 95 offices worldwide.