Commercial property lawyers… are you opening yourself up to negligence?

Commercial property lawyers… are you opening yourself up to negligence?

If you are a commercial property lawyer reading this, you will doubtless be aware of Capital Allowances.
What are they?
Capital Allowances are a form of tax relief available to commercial property owners. The tax relief can be anywhere in the region of 15% to 45% of the original purchase price of the property dependant on the usage of the building and are the tax element of the integral fixtures and fittings of a commercial property. Examples include door handles, air-conditioning systems, alarm systems, lifts, CCTV, roller shutter doors………essentially, any second fix items.
The builder of your client’s commercial property would not have been able to claim tax relief as, at point of construction, these items will have been purchased and installed into the building for a profit and would therefore be classified as “stock in trade”. As soon as the building is sold, the new owner inherits the allowances. In addition, if the allowances have never been claimed in the lifetime of the building and your client is the current owner, they are also entitled to claim. Capital allowances can also be claimed on any post purchase expenditure on the property for refurbishments or extensions.
How do I know if my client can claim?
Section 19 of the Commercial Property Standard Enquiry form asks all pertinent questions in relation to Capital Allowances. An example being;
19.3 If the Seller or any person connected to the Seller (within the meaning of sections 575 and 575A of the CAA 2001), has not submitted a claim to HMRC for capital allowances in respect of any Fixtures to be included in the Transaction, will the Seller be willing to agree in the contract that no such claim will be made by the Seller or any person connected with the Seller?
Answering “not applicable” or “not so far as the seller is aware” (which I am reliably informed happens), may well come back to bite in the future.
New legislation from April 2014
From 1st April new legislation is enforced which introduces ‘mandatory pooling’ of integral fixtures and fittings for Capital Allowance purposes. It will be the responsibility of the seller to produce a schedule and a valuation of all the integral fixtures and fittings. If a figure cannot be agreed then both parties have 2 years to apply to HMRC for a first tier tribunal to settle any dispute and confirm a figure for the allowances. 
The key difference however, and where the element of risk for you comes in, is that if Capital Allowances are not claimed at point of sale then they are lost forever. Factor in the percentages mentioned above, you could be looking at considerable financial losses for your clients.
But we don’t advise on tax matters…
I am sure you have a disclaimer in your terms of business to this effect. However, is this not a case of acting in the best interest of your client? Consider the worst case scenario: not completing section 19 of the CPSE form to the best of your knowledge may result in negligence claims down the line. The knock on effect of claims being increases in Professional Indemnity insurance, damage to your reputation and worse…losing your business.
Managing the risk
So we agree that vast majority of lawyers are not tax specialists. But you can protect yourself and your firm by acting in the best interests of your client and ensuring you complete section 19 of the CPSE form to the best of your ability. You might not be a tax specialist but there are many out there who are….so if you have a client who is selling any commercial property from a care home to a car garage, an office to a hotel, do the initial investigation and introduce them to a tax specialist. You have met your obligations and will very likely, have a happy (and potentially) better off client to boot….! And you will be safe in the knowledge that it will not come back to bite you in the future. 
If you would like to discuss a risk assessment service on your historic files, feel free to contact Paul Greasley of P1 Consultancy – paul@p1consultancy.co.uk 

Legal Eye

https://www.legal-eye.co.uk/

Legal Eye works with law firms to ensure compliance and optimise performance. Their extensive and thorough knowledge of the law and regulations will ensure your law firm is compliant and your processes sound. Files are audited to ensure you are not only complying with the service level agreements you have in place, but very importantly, also the code of conduct. They provide a documented audit trail which is firstly, a requirement of the code of conduct and secondly, essential for PI Insurance purposes and very often for CQS, Lexcel and other quality accreditations. This provides documented evidence of a proactive approach towards risk management. The advice they offer is clear and practical, and they pride themselves on exceptional customer service and unbeatable work quality.

Services include:

  • Specialist expertise across the full range of regulatory, risk and compliance issues to inform your internal decision making.
  • Additional qualified resource where you simply do not have the time to review your regulatory position or to carry out essential ongoing tasks such as file reviews.
  • An online risk hub –  an online resource centre for law firms. The hub provides a comprehensive bank of resources to help COLPs, COFAs, partners, directors and managers to manage risk. It includes precedent policy and procedure documents and templates, access to online training on a range of risk and compliance topics, and a range of useful materials such as ‘how to’ guides, short videos and articles.
  • Drafting and review of key policies and procedures including the supply of ‘document packs’ to save you time researching and writing documentation.
  • Expert advice on how to comply with up-to-date regulation including the very latest requirements complete with a written set of recommendations.
  • Specialist outsourced complaints  handling service provided by former SRA and LeO officers.
  • Gap analysis of your firm’s policies, processes and procedures as they relate to the Solicitors Accounts Rules (SAR) including the production of a written report summarising the strengths and weaknesses of the current arrangements and detailing recommended next steps and actions to put your firm in an even stronger position.
  • Training on SAR and on anti money laundering (AML) as well as other finance-related training which can be delivered virtually for your firm, face-to-face (subject to government guidance) or online via Legal Eye’s Training Academy.
  • A Standard Procedures Manual to provide a practical and comprehensive roadmap for firms to follow when looking to double check whether the current operating procedures are fit for purpose, setting up a new firm – or arm of a firm – or starting a new finance function from scratch.
  • Experienced advice and support for one-off projects such as achieving quality accreditations or switching regulators.
  • Proven high quality training for fee earners and staff held at your office/s covering essential risk topics such as  Anti Money Laundering, data  protection, cybercrime, conflict of  interest and more.
  • Online training from The Legal Eye Academy – core modules available to all staff at their convenience. Includes built-in auto reminder functionality so that you no longer have to chase staff indi-vidually to complete important training. Your package includes free updates to ensure knowledge is always up to date.
  • Added value updates by email to all your key people covering all the latest updates on risk and compliance.
  • The Legal Eye team includes former solicitors, partners and directors in law firms; former case handlers at regulators such as the Solicitors Regulation Authority and the Legal Ombudsman and experienced risk and compliance professionals.
Contact: Paul Saunder Tel: 0203 0512 049 Email:  bestpractice@legal-eye.co.uk Address The Old Grammar School Church Road Thame Oxfordshire OX9 3AJ

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