Leading audit, tax and consulting firm RSM is urging motor retailers to ensure they have maximised available capital allowances – this is a valuable form of tax relief on capital expenditure that motor retailers incur.
Given the current climate, tax relief for capital expenditure incurred on the acquisition, refurbishment/fit-out and development of motor dealerships could provide a welcome boost to cash flow. Capital allowances do not expire, the ability to revisit historical expenditure and identify additional tax relief cannot be underestimated.
Opportunities also arise for motor retailers to design future showrooms in a way that optimises the tax relief available. With the annual investment allowance now at £1m, the ability to accelerate tax savings in year 1 has never been greater.
Gurjeven Sandhu, director, RSM said: ‘The motor retail sector relies on regular capital investment for successful growth. This creates high levels of expenditure that may qualify for tax relief. The current crisis has hit the motor trade hard, and as retailers get back on their feet, now is the ideal time to seek expert advice on tax relief to maximise cash flow.’
Furthermore, the government has introduced a new allowance for capital expenditure that was previously non-qualifying for tax relief – the Structures and Buildings Allowance (“SBA”). This is for eligible construction costs where the contract was entered after 29 October 2018. Given a large proportion of motor retail property consists of large structural buildings and forecourts, SBAs will be particularly relevant. However, it is vital for taxpayers to consider how SBAs interact with existing claims, agreements and processes to ensure tax relief is not lost.
Alison Ashley, partner and head of motor retail, RSM said: ‘Whilst dealers are focused on cost reduction and cash preservation to recuperate from the impact of lockdown, Corporate Identity spend remains on the agenda for many of the manufacturers. Nissan recently showcased a new logo, with alignment of the dealerships’ Corporate Identity to follow.’