Capital allowances are generally the only form of tax relief against capital expenditure (including some of the costs of acquisition of commercial property). Capital allowances compensate for depreciation not normally being deductible for tax purposes. It is common however for businesses to underestimate the proportion of their capital expenditure that qualifies for capital allowances. This means you may be paying too much tax.
There are many situations that give rise to eligible capital expenditure. Generally speaking, a business’ expenditure on plant and machinery will qualify for capital allowances. This tends to be well-known by accountants and business owners.
However, the potential for relief however is much broader. Capital allowances apply to a wider range of business assets, with companies yet to take full advantage of this wider application and financial benefit.
Not only this, on the purchase of a commercial property, a further series of rules apply which may even restrict the ability to claim for capital allowances on any exiting plant and machinery within the building. This can often be a shock to purchasers but also can have a bearing on agreeing commercial terms within the sale and purchase agreement. Ensuring that you have full support during this process of acquisition can ensure that both a) any potential pitfalls are identified and mitigated and b) you are paying fair market price for the purchase of the building.
What are capital allowances? A commonly asked question among UK businesses. Under the capital allowances regime, capital expenditure by companies on qualifying items can be claimed and offset against taxable profits.
Anyone that has an interest in commercial property should have heard the term capital allowances. But, whilst the benefits of making a claim can be significant, many property owners miss out on what are potentially extremely valuable reliefs.
If you have identified assets eligible for capital allowance relief, the next step is to ascertain the type of claim you can make to write off the cost of the asset against your taxable profits.
Research by HMRC has estimated that there potentially £2.1bn has gone begging since April last year. The numbers were based on a survey of nearly 115,000 commercial property transactions that have taken place in this time.
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