According to research by the Law Society, there is a worrying level of confusion among solicitors in their approach towards capital allowances, which could leave them open to risks ranging from loss of income, to client complaints and litigation.
The data reveals that almost three in four (73%) are unlikely to draw their client’s attention to the importance of the capital allowances, while almost four in 10 (37%) solicitors believe it isn’t their responsibility to ensure that capital allowances are assessed. And of those that are willing to explore the tax relief, only 2% admit to taking the initiative to instructing a capital allowances specialist.
Investigating the impact of the new Finance Act 2012, which came into force in April last year, a staggering four in five (80%) solicitors aren’t aware of all the legislative changes on the way capital allowances are claimed during a commercial property transaction. This could be a contributing factor to the £2.1bn that has already been lost by UK commercial property owners. The figures has risen £0.5bn in the Q1 2015.
Although there is a lack of awareness and perhaps a trend of passing the buck, there is an appetite among the legal profession to understand capital allowances more. The survey of professionals revealed that seven in 10 (70%) solicitors would like to know more about this tax relief available to commercial property owners.
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.
It was generally accepted 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."
Ian White, Chair of the Law Society's property section committee, said: "This report demonstrates that attitudes towards capital allowances differ significantly between solicitors who take action only to avoid risks such as litigation, and those who are embracing the changes and seeing the commercial benefits. "Capital allowances work is beneficial to both solicitors and their clients. It need not delay property transactions, so I would urge all solicitors involved in commercial property transactions to make the most of capital allowance relief.
"Capital allowances are available to any business incurring capital expenditure from buying commercial property. Commercial 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.
"Solicitors have a duty to provide advice to clients on capital allowances.