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Fit out project finance

An office fit out can appear daunting for some businesses, particularly as an office relocation is one of the biggest single capital expenses for most companies. Often the project is financed through the company’s cash flow, but there are options to help spread the cost of the move, particularly the fit out itself.

Lease financing is becoming increasingly popular to fund interior projects, as not only does it allow a company to budget effectively by spreading the costs, but it also has great tax benefits too, whilst allowing you to create the workspace that you really want, without compromise.

The key benefits to lease financing are as follows: -

  • Tax efficient – Private sector clients can benefit from a 100% tax deductible solution, particularly attractive to those in higher tax bands.
  • Free up your cash – rather than spend your cash on a depreciating asset, your cash can be utilised for growth, making your capital work harder for your business.
  • Budgeting – Costs are spread and therefore investment decisions can be made far more easily, and your project is not constrained by a strict cash budget. Costs are also fixed for the duration of the agreement in most cases so limited exposure to increases in interest rates.
  • Spread VAT – VAT can be spread as it is paid on each repayment.

As all companies have specific tax allowances, our partnering Lease Finance experts will be pleased to discuss the full benefits of the options available to you. In general, tax savings are only relevant to organisations who pay tax on their profits.

Many of our clients begin to seek lease financing options once the initial fit out and furniture quotation has been raised as this gives a particularly good basis for discussion.

For companies who are comfortable spending their cash, it is important to consider your tax allowances and factor them into your budgets:

CAPITAL ALLOWANCES changes in the 2021 Budget affecting the Construction Industry.

Super-deduction and 50% first-year allowances

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first-year capital allowances. Investments in main-rate capital allowance assets (normally eligible for an 18% writing down) will be relieved by a 130% super-deduction, and investments in assets qualifying for special rate relief (normally eligible for a 6% special rate writing down allowance) will benefit from a 50% first year allowance.

Key features are as follows: -

• Certain expenditure will not qualify and there will be exclusions for used and second-hand assets and expenditure on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021.

• Plant and machinery expenditure incurred under a hire purchase or similar contract will have to meet additional conditions to qualify.

• The rate of the super-deduction will be time apportioned if an accounting period straddles 1 April 2023.

Annual investment allowance

The temporary £1,000,000 limit for the annual investment allowance will be extended by one year with effect from 1 January 2021 to 31 December 2021.

Please do not hesitate to get in touch should you wish to consider your options for either financing your project or for assistance with applying for capital allowances and we will be pleased to introduce you to our partners.

Note:- This article is for information purposes only and professional advice should be sought to clarify your circumstances and the tax benefits you can receive.