After the flood come taxing times
For example, demolition followed by a rebuilding programme is unlikely to qualify for immediate tax relief, whereas expenditure on repairing damaged property would be.
Mr Teale said: “Repairing or restoring a building to its original condition will generally be an allowable expense for tax purposes. If major items of equipment have been ruined in the floods it should be possible to write off the cost of that equipment for tax purposes, provided it has not been allowed previously.
However, any insurance or compensation received for ‘loss of profits’ will be taxable in the same way as normal trading profits – an important point to bear in mind.
Mr Teale said: “Probably the last thing that any small business has in mind when faced with water three feet or more deep on its premises is the tax implications of the recovery process. Nevertheless, traders may very soon be faced with making commercial decisions on how to incur or recover expenditure on the cost of restoring their premises. Depending on the choices they make, tax outcomes could be extremely favourable or equally disappointing.”
He added that where insured companies are concern, the tax implications of repairing flood damage are broadly neutral. “As long as the cost of repairing damage is covered by an insurance claim, there is no net cost to the trader, and therefore no tax implications.”.
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The Editor © Hardhatter 2007