One to Many Letters campaign targets property owners and landlords

Commercial property landlords and occupiers need to be aware of the recent ‘One to Many’ letters campaign by HMRC relating to capital allowances which are available for plant or machinery fixtures in properties. As part of the campaign, HMRC has sent out two letters: one to occupiers who have invested in qualifying new plant and machinery assets, and one to companies who have leased out assets which could potentially include landlords installing some fixtures and fittings in rental properties. Prior to the 31 March 2023 deadline, companies have been able to claim a 130% ‘super-deduction’ capital allowance on some qualifying plant and machinery investments and a 50% ‘SR allowance’ for others.

For companies who have leased out assets, HMRC has written to some who have claimed these allowances. The property owners, or their tax agents, will receive the letter from HMRC which outlines the rules and provides guidance on correctly claiming these enhanced allowances for leased assets.

For companies whose accounting period straddles 1 April 2021, HMRC is asking them to check the date when the company entered into the contract to buy qualifying new plant or machinery assets. Again, the letter provides guidance for correctly claiming these tax incentives because a company cannot claim the super-deduction if it agreed a contract to buy the plant or machinery before 3 March 2021, even if it was paid for after 1 April 2021.

Why has HMRC launched this campaign?

HMRC has previously run several ‘nudge’ letter campaigns in the past, including one for research and development (R&D) tax relief. However, this is the first time it is aimed at companies claiming capital allowances tax incentives.

The blanket-style campaign targets companies that HMRC know have already claimed the 130% or 50% capital allowances. The letters have an educational aspect but have been aimed at potential non-compliance and to nudge companies into reassessing their claims, putting the onus on them to resubmit their tax returns if they believe they have claimed incorrectly.

Leased assets in property – fostering economic growth

The ‘One to Many’ letters campaign is particularly relevant at the moment. Under the enterprise pillar of the government’s strategy to foster economic growth across the UK, it is currently a golden time to benefit from capital allowances as they effectively wipe out the tax on marginal investments because the tax relief arising fully offsets the anticipated future tax payments on the returns from those assets.

What should companies do if they receive a letter?

Companies would be well advised to take these letters seriously if they receive one. As the letters are aimed at companies that HMRC knows have claimed for these enhanced allowances and should only have  been sent where HMRC’s systems have flagged up some potential issue (though not necessarily amounting to actual non-compliance), it is up to the companies to check they are claiming correctly or amend their tax returns. If any issues are identified, they should be disclosed to HMRC and amended as soon as possible. For companies that fail to do so, there could be serious consequences including potential financial penalties.

If there are no issues, then nothing further needs to be done but the option exists to consider reassuring HMRC to prevent a future compliance check or enquiry.

Even if a letter has not been received, the campaign clearly shows that the super-deduction is an area where HMRC perceives errors have occurred, so it would be worth companies double-checking that they have got their tax treatment right.

Therefore, it is essential that companies seek specialist tax advice to ensure they get their tax bill right and avoid any unexpected consequences from HMRC.

Steven Bone is a director at Gateley Capitus