Capital Allowances

In simple terms, Capital Allowances is a form of tax relief that can be claimed by commercial property owners to reduce the amount of tax they pay on the profits of their business. If you own a commercial property and pay tax on the profits of your business there you are likely to be entitled to claim Capital Allowances on various items relevant to your business, including;

  • the cost of most business fixtures and fittings – machines, technical equipment and furnishings (we go deeper than your accountant would usually)
  • Certain buildings
  • Conversions and extensions of part of the commercial property
  • Other case specific items

It is your legal right to claim back the first and second fix that are in the make-up of the building, including the pipes, wires, lift shafts, lighting systems and joinery etc.

As the owner of a commercial building, you may have come across Capital Allowances in one form or another in the past, however many commercial property owners may not have fully taken advantage of the available Capital Allowances. We have found that only 10% of those entitled to this form of tax relief have claimed their full entitlement. Given the tough economic climate British business owners currently face, tax relief would certainly be welcome come the tax year end for most owners.

Retrospective, current and future Capital Allowances

Were you aware that if you haven’t claimed your entitlement yet you may be entitled to claim back Capital Allowance refundsfor tax that you paid in the previous year on your business? It is common for your accountant to have claimed for some of the HMRC Capital Allowancesavailable, but as it is a complicated law we find that in 90% of cases a specialist Capital Allowances company is able to help you claim back much more. This is no fault of the accountancy firm, however it is a very specialised area and they may not be aware of all the updated legislation.

In fact, our preferred specialist partner has agreements with accountancy firms all over the country who outsource this part of their work to them because they are the experts in this area.The AIA or Annual Investment Allowance was brought out by the Government in 2008 as a stimulus for the economy for commercial building owners. It is currently at £100,000 Capital Allowances Pool, of which you can draw back the percentage of tax you paid in the previous year. After April 2012 the AIA pool drops to £25,000 which again you can draw down the % of tax rate you paid the previous year and receive a cheque for that amount. More information about Annual Investment Allowance can be found here.

An example would be;

John purchased the commercial property in June 2011
He paid £750,000 for the property
He paid 40% tax last year
He received £40,000 Capital Allowances rebate
His tax relief over the next 10 years will work out to be £53,000
His overall net benefit works out at £93,000

Commercial property owners are entitled to claim back Capital Allowances in tax relief for their intrinsic fabrication and property costs for current, past and planned commercial ventures according to the building schedule. In layman’s terms, the intrinsic fabrications of a building refer to all the items that would fall out of a building if you picked it up and shook it about. In most cases you would be entitled to claim back around 30% of the cost of your building from the Government (between 10% and 45% depending on the usage of the building, e.g. industrial would be 10%, a hotel would be 45%).

The original legislation that governs HMRC Capital Allowances has been around for over 100 years. Some industry insiders would argue that the amendment of the Capital Allowances Act in 2001 has made claiming back capital allowances much easier, however we have found that a large majority of commercial property owners and their accountants do not have the specialist knowledge of the Capital Allowances Act to be able to claim back everything they are entitled to. If this is the case for you then we can help. We have partnered with CA TAX Solutions who have been helping commercial property owners to claim back their capital allowances online, over the phone and in person for over 4 years and who are currently working on claims in the region of £1.5billion for clients.

You can find out how to claim here by reading our full claims process and get your claim started by filling out our simple client instruction form to start your claim for capital allowances online.