Capital allowances: do they reduce lending risk?

Abstract

Most property valuations ignore tax issues as instructed to do so by the valuation guidelines. This paper highlights the cash savings that are available in some properties from the tax relief generated from capital allowances, and how they affect the return on investment. As the driver for investment in the commercial property market in the UK is shifting from capital growth to income, the post-tax position becomes more important. This paper therefore makes a case for looking beyond the ‘Red Book’ valuation when re-examining loan to value ratios in a changing market. Copyright © 2004 Henry Stewart Publications