Car dealers are being urged to ensure they have maximised available capital allowances resulting from infrastructure investments in a bid to leverage vital tax relief.
Audit, tax and consulting firm RSM said that, given the current economic climate, tax relief for capital expenditure incurred on the acquisition, refurbishment and development of dealerships could provide a welcome boost to cash flow.
Capital allowances do not expire, the ability to revisit historical expenditure and identify additional tax relief cannot be underestimated, it said.
RSM director, Gurjeven Sandhu, said: “The motor retail sector relies on regular capital investment for successful growth. This creates high levels of expenditure that may qualify for tax relief.
“The current crisis has hit the motor trade hard, and as retailers get back on their feet, now is the ideal time to seek expert advice on tax relief to maximise cash flow.”
RSM said that opportunities also arise for motor retailers to design future showrooms in a way that optimises the tax relief available.
With the annual investment allowance now at £1m, the ability to accelerate tax savings in year one has never been greater, it said.
Furthermore, Government’s recently-introduced allowance for capital expenditure that was previously non-qualifying for tax relief – the Structures and Buildings Allowance (SBA) – should also benefit car retailers.
The SBA is for eligible construction costs where the contract was entered after October 29, 2018.
RSM said that, given a large proportion of motor retail property consists of large structural buildings and forecourts, SBAs “will be particularly relevant”.
It is vital for taxpayers to consider how SBAs interact with existing claims, agreements and processes to ensure tax relief is not lost, however.
Alison Ashley, partner and head of motor retail at RSM, said: “Whilst dealers are focused on cost reduction and cash preservation to recuperate from the impact of lockdown, corporate Identity (CI) spend remains on the agenda for many of the manufacturers.
“Nissan recently showcased to new logo, with alignment of the dealerships’ corporate Identity to follow.”
Toyota also unveiled a new CI last month, but said in a statement issued to AM at the time that its “current retailer signage will remain in place and will be reviewed in the Toyota 2025 Network Strategy."