Property embedded Capital Allowances: A summary for 2015/16

Background

Capital Allowances (CAs) should be at the forefront of all commercial property owners minds. Generally, such claims will be in relation to so-called property embedded fixtures and fittings. In other words, fixtures and fittings acquired with the building and / or certain expenditure on refurbishment of a property.

For more information on CAs generally please contact us.

Summary

It is possible for a valid claim to be made resulting in the benefit of a historic CA claim being offset against two years’ worth of tax liabilities. This may take effect as a repayment from HMRC and / or a reduction in the next years tax bill.

Under general principles, a claim should be made on a ‘real time’ basis. In other words, when it is clear that a commercial property owner acquires a commercial property and incurs expenditure on the property embedded fixtures and fittings.

Planning for 2015/16

As we are now a couple of months away from the 2015/16 tax year you will find some quick tips on making a claim (if you are a property investor) or helping a client make such a claim:

• From 2015/16, the ability to amend tax returns from 2013/14 will be lost. This means that processing a claim for non-corporates between September and December of this year (2015) will secure the benefit. This will allow a claim to be made against the liability for 2013/14.

• A claim successfully submitted for such a person before September is likely to result in a refund for the latest tax bill and allow for any allowances to be included the 2014/15 tax year.

• Practically speaking, for 2015/16, we would recommend that an adviser with a portfolio of corporate clients looks for those companies with a year ending months down the line. This will allow a feasibility report to be done, the required ground work and a claim to be made in time.

The ‘perfect storm’?

Historically speaking, The Annual Investment Allowance (AIA) is at its highest ever level (£500,000). In the 2015/16 tax year the ‘perfect storm’ for a valuable and attractive CA claim would be for a property purchased in 2013 and 2014.

Why is this a ‘perfect storm’? Well, such circumstances would allow for both a historic claim and the use of allowances of up to £500,000.

For example, an office that was purchased for £250k may have £62.5k of CAs in respect of the inherent fixtures and fittings. These can be written down in full if there is a balance of AIA available.

As such, a CA claim on this bases would be worth £25k, assuming they were 40% taxpayer.