Understanding the Concept of Capital Allowances
Capital Allowances are a tax benefit against plant and machinery for the purpose of the trade and have been around for over a hundred years. They are very MISUNDERSTOOD and very UNDERESTIMATED. One of the more common forms of Capital Allowance is when you have spent capital buying, building, or improving a commercial property.
If you have invested in a business asset like a new building or new equipment, this could potentially reduce your taxes.
Capital Allowances provide tax relief on necessary expenditures to invest in assets for your business. As there are many ways to take advantage of these allowances, businesses miss out on this opportunity to claim what could be a substantial tax saving.
Most business owners believe they are being dealt with because they have an accountant who will do an excellent job with the information he/she is given, but what about those missed tax savings that are usually embedded in the fabric of the building and sufficient detail isn’t provided to the accountant?
In fact, the tax savings achieved by claiming the embedded capital allowable items within a commercial property can also be significant and should not be underestimated.
Why is the value of Capital Allowances underestimated and not always maximised by accounting routines?
However, most businesses don’t fully understand what constitutes as plant & machinery so often they spend on items that qualify for Capital Allowances but don’t realise it and therefore don’t provide the detailed information to the accountant, so no claim is made.
The main items that are missed are usually embedded in the fabric of the building and simply taken for granted. They may have been purchased as part of a building, installed under refurbishment, or during development under stage payments.
The only way a full claim can be made is to undertake a full detailed survey of the property.
Key Question: Are you a UK taxpayer with commercial property interests?
If yes is your answer, then you are probably sitting on significant tax savings that you’re unaware of.
If you’re buying selling or spending money on commercial property, then this could worth tens if not hundreds of thousands of pounds.
Most people believe that this is already being dealt with by their accountants however routine systems often only scratch the surface and you could be missing out on many claimable items.
On average, for every £100,000 spent on commercial property, our process uncovers £25,000 of Capital Allowances that can be used to recover and offset tax liabilities.
Click on each of the selected case studies below to get inspired:
Case Study 1 – Acquisition
A Limited Company acquired a newly built property that has been built by a property developer. Section 198 was not applicable to the transaction meaning that the Capital Allowance claim could be calculated against the buyer’s costs (not the developers). Capital Allowance claim £374,151
Case Study 2 – Leasehold Improvements
The client’s accountant did a great job of claiming a large amount of Capital Allowances, and once added disciplines applied, an even larger number was recovered, meaning the client had retrieved back most of their expenditure. We identified capital allowances totaling £217,567
Case Study 3 – New Build
The claim was based on the cost of building the two care home properties by our client. Capital Allowances totaling £660,000 was a fantastic result for our client!
Case Study 4 – Refurbishment
Total Claim £309,352 – The property refurbishment was funded 55% by a Company and 45% by a pension fund. This meant the claim was split accordingly.
26 September 2023
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Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.