One of the most common misconceptions is the view that any benefit achieved by claiming Property Capital Allowances will be cancelled out later by an increased chargeable gain (if, of course, the property is ever sold).
This is not true and made clear in Section 41 (1) Taxation of Chargeable Gains Act 1992 (TCGA 1992), which says “Section 39 shall not require the exclusion from the sums allowable as a deduction in the computation of the gain of any expenditure as being expenditure in respect of which a capital allowance or renewals allowance is made” (Section 39 TCGA says any expenditure that would be an allowable deduction when calculating an income or corporation tax liability may not be deducted when computing a capital gain).
Section 41 TCGA 1992 therefore specifically provides that it is not necessary to deduct any capital allowances from the cost of an asset for capital gains purposes, so it is not possible for a capital allowances claim to create or increase a chargeable gain. Furthermore, claiming capital allowances also has no effect on the calculation of any capital gains indexation allowance that may be claimed.
Capital Allowance claims on Land and Buildings do not reduce their Balance Sheet value. This means when you sell the property Capital Gains are based on the original cost shown in the Balance Sheet.
Legislation from 1 April 2014 (Corporation tax), 6 April 2014 (Income Tax):
- This does not mean Property Capital Allowances no longer exist.
- The new rules have simply ensured plant and machinery is claimed only once.
- The legislation also ensures that available claims take place within two years of a commercial property changing ownership.
- Put simply, property Capital Allowances should now be documented in every commercial property transaction from April 2014.
The fact that invoices may not be available does not create a problem.
5 December 2023
Capital Allowances ManualCapital allowances play a significant role in taxation. Allowing businesses to claim deductions for the depreciation of their assets. Among these assets, plant and machinery are frequently mentioned. However, the term “plant and machinery” is not explicitly defined in tax law. It should also...
22 November 2023
Autumn Budget 2023: Changes to Capital AllowancesThe Autumn Budget of 2023 has arrived, and with it comes significant changes and developments the government has put in place. Chancellor Jeremy Hunt delivered the statement on Wednesday, 22 November 2023. For businesses and individuals alike, these adjustments in tax policies can have far-reaching implications.
Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.