TAF (Trade Association Forum) have produced a useful fact sheet on Capital Allowances. These are the main form of tax relief against expenditure on commercial properties of all types in place of depreciation (which is not allowable for tax purposes) on qualifying items of plant and machinery and extends to many fixtures and integral features that can apply to new build development or property acquisition; business premise renovation, refurbishment or fit out; property extension or conversion. Commercial property owners and investors can also retrospectively claim for unused allowances, (often going back years), for alterations, extensions and upgrades to their building.
While claiming capital allowances on movable items such as machinery and vehicles are common practice, the full scope of claimable allowances and the complexity of the rules, have resulted in billions of pounds of tax relief going unclaimed.
The Benefit: A Capital Allowance claim can generate up to 45% tax relief against qualifying expenditure on commercial property of all types.
Scope: An example of some of the more common items that can be claimed are power, lighting & heating installations; data installations; suspended ceilings, specalist flooring & air conditioning; fire & security alarm systems; sanitary ware, kitchen fittings, lift installations …and many more depending on commercial property use.
Eligibility: Owners of a commercial property, either freehold or long leasehold, who have incurred qualifying expenditure. This can be a UK company, partnership or individual who is subject to either UK corporation or income tax.
A Capital Allowance specialist will often identify up to 4 times in additional allowances by assigning a specialist quantity surveyor versed in the scheme to carry out a full site survey; uncovering all the elements that fall in to plant and machinery, special pool and integral features to uncover all claim possibilities.
Factors: The current Annual Investment Allowance (AIA) is £200,000. The balance of claim qualifying expenditure above that amount attracts a writing down allowance of 8% pa for integral features and 18% pa for plant & machinery.
Enhanced Capital Allowances: (ECAs) enable a business to claim 100% capital allowances on spending on qualifying equipment (plant and machinery) that meet published energy saving criteria. There are three schemes: Energy-saving plant and machinery; Low carbon dioxide emission cars and natural gas and hydrogen refuelling infrastructure; Water conservation plant and machinery. Businesses can write off 100% of the capital cost against their taxable profits in the period during which they make the investment. This can deliver a helpful cash flow boost and a shortened payback period.