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.
Figures as to the amount of property owners claiming allowances vary, but it is suggested that less than 10% of commercial property owners currently claim the capital allowances they are entitled to.
Even where claims are being made, capital allowances are often misunderstood and it’s common for businesses to underestimate the proportion of their capital expenditure that qualifies for capital allowances. All this basically adds up to property owners paying too much tax!
So, it might be useful at this point to give a little bit of background to the idea behind capital allowances…..
Basically; capital allowances offer tax relief against capital expenditure. Broadly speaking, they compensate for the fact that depreciation is not normally deductible for tax purposes. So; you buy a capital asset, which depreciates in value over time, and because of that depreciation you are entitled to claim an allowance against the value of that asset, which will be deductible for tax purposes, thus reducing your taxable profits.
The list of capital assets used in commercial property which may qualify for capital allowances is long, and many people don’t necessarily understand the full range of assets in respect of which a claim can be made. Obviously, there are fixtures and fittings, but there are also the moveable items like furniture, as well as what’s known as integral features; things like air conditioning and emergency lighting.
Also, it is worth noting that allowances are potentially available on all types of commercial property, whether in relation to a construction project, an extension or alteration, a refurbishment, or in respect of a purchase of a new build or second-hand property. Finally, it is worth remembering that you don’t necessarily have to incurred the capital expenditure yourself.
The rules on making capital claims have changed significantly in recent years and as with many areas of tax have become increasingly complex. It’s crucial that property owners are aware of those changes, especially where they are contemplating a sale or purchase.
Enterprise Tax can advise you on all aspects of capital allowances in relation to commercial property, in order to maximise the tax relief available to your business through a capital allowance claim.
The starting point is for our team to undertake a review of your purchases and assets by reference to periods of account. We will identify and categorise all qualifying expenditure, including missed opportunities, and produce the supporting documentation and ultimately the claim to send to HMRC on your behalf.
We are also experienced in working alongside other professional advisers, such as lawyers as part of project teams. Factoring allowances into a project early as part of the negotiation process can have wider beneficial tax and commercial implications.