FinanceLandlords need to get tax relief for energy efficiency improvements - If...

Landlords need to get tax relief for energy efficiency improvements – If 2050 greenhouse gas deadlines are to be met

With no government funding or grants available to achieve net zero greenhouse gas emissions by 2050, landlords need to maximise the tax relief that they can claim for the works they are required to undertake, say leading tax and advisory firm Blick Rothenberg.

Partner and Head of Property at the firm, Heather Powell said: “Government Consultation Documents offer no hint of grants or other funding for the significant works that many landlords will need to undertake to meet property standards being set by the Government.”

She added: “The consultations have made it clear that landlords are going to be made to pay for the improvements required.  They set out proposals to ban the letting of industrial and commercial buildings which do not have an Energy Performance Certificate of B or above from April 2030 and the letting of homes which do not have an Energy Performance Certificate of C or above from April 2025. The current threshold for all properties is a certification of E.”

Heather said: “Achieving ‘net zero’ by 2050 is a key objective of all political parties and landlords need to prepare for the implementation of this legislation by assessing and undertaking the necessary works or planning the sale of their properties.”

She added: “With no other support available, Landlords who have no plans to sell need to maximise the tax relief that they can claim, on works that need to be carried out, especially as many of the reliefs are only available for a specific period.”

Heather said: “Companies can claim a ‘super deduction’ for plant and machinery of 130% of the price paid up to 31 March 2023.  There is no limit on the amount that can be claimed, and the deduction is applied against the rental profits for the year – significantly reducing the corporation tax payable on the profits for the year in which the plant is acquired.”

She added: “The relief for partnerships and individuals is not as generous, but they can claim for plant purchased via the ‘Annual Investment Allowance,’ which gives tax deduction of up to £1,000,000 a year.  The £1,000,000 allowance is available up to 31 March 2023, thereafter it falls to £200,000.”

Heather said: “Expenditure that does not qualify for these ‘capital allowances may qualify as a repair, and thus as a deduction against profits for all landlords.  Unfortunately, there is no clarity on this point in the tax legislation.

She added: “As the requirement to undertake the works is being imposed by the Government, it would appear to me to be reasonable for the passing of the Energy performance Certificate, (EPC) legislation to be introduced at the same time as confirmation from the Treasury that a full tax deduction will be available to all landlords for the costs incurred of improving the EPC status of their property. This would incentivise all landlords to undertake the works and would be a win-win for everyone.”

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