The Complete Guide to Picking a Good Capital Allowances Advisor

Whether you’ve bought a building, carried out a major construction project or invested in business equipment, ensuring your capital allowances claims for this expenditure is properly maximised is important. However, the complexity of these claims means that expertise, precision and experience are essential.

Tax relief claims and the advisors preparing them are under increased scrutiny by both HM Revenue & Customs (HMRC) and the UK Government. Earlier this summer, a Government consultation on ‘Raising Standards in the Tax Advice Market’ proposed a new framework to regulate advisors, due to the Government recognising there are ‘practitioners who are incompetent, unprofessional or unscrupulous practitioners who continue to operate, harming their clients and the public finances.’

Just last month, we’ve seen HMRC take action against practitioners in the Research & Development (R&D) market, raiding offices and making arrests on tax relief fraud grounds (BBC News, 2023). The capital allowances market, like R&D, remains unregulated, meaning anyone can sell themselves as a capital allowances expert with little to no actual knowledge or experience.

The capital allowances market, due to the lack of regulation, includes a varied range of firms; those that are competent, providing honest advice and delivering great value for their clients, but also those who are blatantly disregarding tax legislation, rushing out reports, and charging extortionate fees.

So, how do you pick the right advisor? What should you consider and what questions should you ask?

Here’s a quick summary checklist:

• Research the Firm and Their People – Look for regulation, qualifications and experience and generally, who is actually going to be doing your work.

• Free Consultation and Proposal – To ensure that the work will actually add value to you and your business. Don’t feel pressured into work before you are happy to proceed.

• A Comprehensive Process – A clear, detailed scope of works that includes all the support you and your accountant needs.

• Clear and Transparent Fee Structures – Make sure you understand what benefit you are getting, and how much it’s going to cost you. Avoid firms that charge excessive contingency fees without providing clear justification or explanation. Make sure there are no hidden fees.

• After Claim Support – No ‘wham bam, here’s your report’ and leave you to do the rest. Make sure the advisor offers all the support you need, liaises effectively with your in-house finance team and/or accountant and will deal with HMRC enquiries.

This guide considers each of these in more detail below:

1.      Research the Firm and Their People – Who Are They?

Whether they approach you or vice versa, the first step is to research the firm and the individuals behind it.

Capital allowances are a form of tax relief, claimed in your or your company’s tax returns. Incorrect claims, made either deliberately or by mistake, can lead to enquiries, fines and penalties. The firm and its people need to be qualified and experienced to ensure that your claims and tax returns are handled correctly.

Markers of a Good Capital Allowances Firm:

Is the Firm Regulated?

While the capital allowances market is unregulated, reputable advisors often choose to be accredited or regulated by professional bodies to demonstrate their commitment to quality service. Look for an affiliation with:

• The Chartered Institute of Taxation (CIOT)

• The Royal Institution of Chartered Surveyors (RICS)

• The Association of Taxation Technicians (ATT)

• The Institute of Chartered Accountants in England and Wales (ICAEW)

A regulated firm will be upheld by their regulators standards and guidelines when it comes to working practices, professional conduct, how they operate and the levels of professional indemnity insurance (PII) they must hold to protect you. PII is designed to protect both the advisor against claims but also the client by providing a safety net to pursue compensation for financial losses caused by an advisors’ mistakes or negligent advice.

Are the People Qualified?

It’s also crucial to check the qualifications of the individuals leading and working within the firm. Look for those who hold qualifications in tax (CTA or ATT), surveying (MRICS), or accounting (ICAEW), and who are bound by professional standards.

 Such individuals have clearly demonstrated competence in these areas and are bound by professional standards to provide good, honest and comprehensive advice to clients.

What Do They Know? What Have They Done?

 Qualifications and regulation are important, but practical experience also matters. Look to understand:

• Where did they learn and train?

• What firms have they worked for in the past? Do they have good reputations?

• Are they a true specialist in capital allowances or a general tax advisor?

• Have they got experience advising on capital allowances in your industry?

• Can they handle complex claims or transactions?

• Can they provide testimonials and references related to your sector?        

Can You Put a Name to a Face?

Reputable firms typically present their people openly on their websites. Make sure you can see who will be advising you and, if possible, meet them face-to-face or via video call before proceeding.

 Commonly, bad practice firms hide behind flashy marketing and bold claims, but don’t actually show themselves or the people that lead and work at the company.

 You should also ask if the work is being carried out in-house, by the people you’ve met and spoken with, or if any aspects are being outsourced and to whom.

2.      Free Initial Consultation and Proposal

 A good capital allowances advisor should offer an initial consultation at no cost. During this consultation, they should discuss: 

• What project you’ve undertaken or the property you’ve purchased

• How much you’ve spent on the project/property and when

• Whether you are entitled to claim

• Their estimate of allowances on your expenditure incurred

• The estimated tax savings and benefit, based on your tax position and/or discussions with your accountant

• Their fee and the scope of their detailed work

Make sure that you and your accountant are happy with the firm, their proposed service and fee proposal before you proceed.

3.      What is Their Process? Is it Comprehensive?

Capital allowances claims must be thorough and compliant to withstand potential scrutiny from HMRC. An advisor should not only aim to find you the maximum relief but also ensure that claims are fully compliant with current legislation. Make sure an advisors’ proposed scope of work includes:

• Regular updates on the progress of your claim

• Includes any ad hoc questions you have throughout

• Liaising with your accountant and any other representatives to gather the information they need to do the capital allowances work

• Site surveys carried out by a Chartered Surveyor

• Any cost assessments and breakdowns needed carried out by a Chartered Surveyor

• A detailed report setting out your claim that reconciles back to your accounts

• Any support your in-house finance team or accountant needs with the claim

• Support with any HMRC enquiries relating to the claim – check if included in your fee, a separate charge for handling an enquiry is a concern.

• Clear terms regarding professional indemnity insurance (PII) and the firm's complaints handling procedure (CHP).

Compare scope of works carefully – what’s included? What’s not included? Is someone’s fee too good to be true?

Compare like for like, and notice any differences in scope of works – are you really getting a good deal?

4.      What Do They Expect From You? How Much Time is This Going to Take You?

Any capital allowances advisor worth their salt will invest time to research and understand your business and your property or projects properly, coming out to see you and your buildings, making sure you are entitled to claim and preparing detailed analyses and reports as well as giving all the support you and your accountant needs to include a claim in your tax returns.

The main time burden on you, your teams and accountant will be supplying the information needed for a claim; accounts, invoices, builder’s quotes and contracts related to the money you’ve spent that is being reviewed. All the information needed, and why it’s needed, should be fully explained.

However, we are aware of some advisors’ services causing serious time burden on their clients. Some firms send lengthy forms, sometimes hundreds of pages, to clients asking them to confirm asset-by-asset that they have not claimed or are aware of a claim by a prior owner of these assets – this is the job of the advisor to check!

5.      How Much Are They Going to Charge You?

Fees for capital allowances services should be transparent, and directly comparable to the benefit and tax savings they will provide you and your business.  The most common fee structures are:

Contingency or performance related fees: A percentage of allowances identified, which means no fee if no allowances are found. Be cautious, though as this structure might tempt less scrupulous firms to inflate claims beyond what is allowed by tax legislation. They work well if there is uncertainty about the potential outcome, but do they make sense for your claim? What happens if your advisor finds more allowances than they estimated? Consider discussing a cap on contingency fees if you are concerned about fees skyrocketing.

Fixed Fees: Fixed fees offer certainty from the outset but if the firm identifies zero allowances, what happens then? What are their abortive fees? Make sure you ask these questions and are sure of the outcome before you agree to a fixed fee.

Hourly Rate Fee: Can be offered by the accounting firms, as the wider practice will charge on an hourly rate basis. They do offer certainty from the outset, but make sure you agree a budget with the advisor and insist on updates on time spent and fees accumulated. Communication is key to avoid nasty surprises, higher fees or overrun charges.

The advisor should be transparent about their fee structures and willing to consider alternatives. Make sure you fully understand all potential costs and avoid firms that push for high contingency fees without clear justification.

6.      How Will They Work With Your Teams and Your Accountant?

A good capital allowances advisor should work seamlessly with your in-house finance teams and accountant to ensure:

• Effective and open lines of communication to make the claim process easy.

• That they provide an analysis and report that reconciles to your accounts

• That any other necessary information is provided so your accountant can incorporate the allowances without extra work or fees.

• The claim is correctly made to avoid future issues with HMRC.

Avoid advisors who simply deliver a report and leave you and your accountant to figure out the rest.

7.      What After Claim Support do they Offer?

Consider the ongoing support offered after the initial claim:

• HMRC Enquiry Support: Do they provide assistance if HMRC raises an enquiry into your claim? Do they charge extra fees or is this included? Make sure that they provide timely updates during enquiries, and meet HMRC deadlines for responses.

• Future Consultations: Can you reach out to them if you have related queries in subsequent years?

• Ongoing Relationship: Are they available for ad-hoc advice or additional services down the line?

A firm that offers robust after-care demonstrates commitment to their clients' long-term success.

Choosing the right capital allowances advisor is crucial to ensuring your claims are maximised, robust, and compliant, and that you have certainty in your tax position.

By thoroughly researching potential advisors to understand their regulation, qualifications and experience, understanding their processes and fee structures, and considering the level of support they offer, you can make an informed decision in selecting an advisor who meets the above criteria and aligns with your business needs, ensuring a smooth and successful claim process.