POORLY-advised businesses in the South are missing out on government-backed tax relief relating to the life cycle of commercial and certain residential properties.

Alun Oliver, the managing director of property tax specialist E3 Consulting, warned that too many firms are under-claiming their capital allowances.

These allow you to claim tax relief at various stages of a property’s life, from purchase and build through to refurbishment, granting new leases, repairs and sale.

Healthcheck reviews by Southampton-based E3 Consulting reveal that up to 85 per cent of cases fell far short of the figure they were entitled to from HMRC, with just 10-12 per cent correct.

Alun explained to the audience at the firm’s latest property taxation update: “Taxpayers who don’t seek professional advice for capital allowances should be aware that if they are not properly agreeing the position at the time of purchase the tax consequences of the New Fixtures Rules could be very costly, resulting potentially in no tax savings.”

He added: “We see lots of clients, and their solicitors, surveyors and accountants, that don’t fully appreciate the consequences of the CPSE (Commercial Property Standard Enquiries) answers – often denying tax savings – if not challenged or clarified.

“A lot of taxpayers don’t know how the rules work and are not claiming their capital allowances, either through ignorance or poor advice.”

Furthermore, the CPSE now requests the name of the capital allowances adviser for each party (clause 32.10); Alun also suggested this was an indication of the complexity of the tax legislation and requires specialist input to truly optimise the position.

Examples of where E3 Consulting has helped clients include a GP surgery in South Wales, with a tax relief of £71,250 on the £310,000 construction of the purpose-built facility.

A supermarket shell build in Staffordshire qualified for tax savings in excess of £97,000 on the £4.4m construction costs.

Capital allowances claims are becoming more contentious these days, the seminar heard.

E3 Consulting provided litigation support to a regional law firm in the North West that was defending a small regional firm accused of negligent advice on capital allowances relating to a client’s property investment.

Alun provided expert opinion, analysed the circumstances of the situation and qualified the cost of lost tax relief missed, resulting in an out-of-court settlement and with the damages agreed at a significantly reduced level.

He said: “We are increasingly being brought in by solicitors as part of the conveyancing due diligence before a sale or purchase.”

In another disputed tax claim on a residential property renovation in North Wales, a client received much higher tax relief of £200,425 – the original claim of £90,000 having been challenged by HMRC.

A medical facility in the Midlands, following a £17.6m redevelopment of a former scrap yard, gained more than £200,000 in tax savings following the removal of contaminated soil, asbestos and invasive Japanese Knotweed.

The seminar also shone the spotlight on the “complex” and “poorly understood” Community Infrastructure Levy – CIL for short.

This is calculated on the total floor space of new development and particularly affects residential property, including home owners who build extensions as well as larger developments, such as hotels, residential, retail and student accommodation.

Alun said: “I’ve had house owners in tears on the phone to me - they project manage their new extension or home but had not realised CIL applied, or that they could have had an exemption under the self-build exemptions available – but for these to be granted it has to be agreed with the council before works commenced. A costly mistake.”

According to figures provided by E3 Consulting, Southampton’s maximum CIL rate per square metre is £70. In the New Forest it is £80 per square metre and on the Isle of Purbeck, in south Dorset, it is £180 per square metre.

CIL savings by the firm have included £110,000 for a self-build house at Sandbanks, Poole.

Alun said: “CIL is poorly misunderstood and spans different disciplines – surveying, design, planning, finance, tax and law. Getting timely advice, before works starts on site, is vital.”

The property taxation update was held at the Concorde Club, Stoneham Lane, Eastleigh.