Understanding Capital Allowances
What are capital allowances?
In simple terms, capital allowances provide a valuable opportunity for those that spend capital on commercial properties. Allowing them to subtract a portion or the entirety of qualifying expenditure from their profits prior to tax payment. These allowances are determined based on various types of expenditures and can be applied to costs such as:
- Building or renovating a commercial property,
- The acquisition of new or used buildings and structures,
- Investments in plant and machinery.
Capital allowances cover a wide range of items such as, lighting, heating, and health and safety equipment.
Qualifying for Tax Relief
Qualifying items must serve a purpose
It’s important to note that capital allowances are not always available. The qualifying items must serve a purpose within the trade to have a chance of qualifying for tax relief. Claiming capital allowances offers numerous advantages, including gaining a tax benefit that reduces and potentially offsets your tax liabilities. But, there may also be the ability to claim either the entire cost or a proportion of the capital expenditure against your company’s taxable income. This can result in improved cash flow. Meaning you can retain funds within your business and provide a stronger safety net in case of unexpected challenges.
Maximise Tax Savings and Business Growth
Opportunities with retrospective claims
By claiming capital allowances, you can save on taxes and reinvest the amount saved back into your business. This infusion of funds can support potential expansion or growth plans, bolstering your business’ finances and overall business prospects.
Furthermore, if you purchased a property, you may be missing out on tax refunds related to purchase expenditure. Retrospective claims can still on many occasions have no time restriction, presenting an opportunity to review your property costs and potentially unlock substantial tax benefits.
For properties acquired after April 2014, there could be a two-year time deadline from completion to claim these allowances. However, it’s important to note that the two-year deadline is not always applicable and depends on various factors associated with the purchase. We strongly encourage you to review all transactions as capital allowances can often be claimed even after two years have passed. It is possible that you are not too late to claim assets that are two years old, potentially entitling you to significant tax reliefs.
Discover Hidden Tax Savings You Might Be Overlooking
You must be the owner of assets that qualify
If you’ve invested in property construction, purchase, renovation, or incurred capital expenditure on business-related plant and machinery, there’s a high likelihood that you qualify for capital allowances, leading to significant tax savings.
A general guideline to keep in mind is that you must be the owner of the asset you intend to claim tax relief on. If you have leased or rented the assets, capital allowances may not be applicable.
It’s worth noting that expenses incurred between 1 April 2021 and the end of March 2023 could potentially qualify for the super-deduction, which provides a 30% uplift on qualifying costs (e.g., a 130% capital allowance claim). However, specific conditions apply, and this deduction is only available for companies. Unincorporated businesses, such as self-employed individuals, won’t be eligible.
Claiming Capital Allowances in the dental industry
Unclaimed Allowances for a Dental Business
In a recent case study, our client purchased a property as a dental practice and sought to claim allowances. We discovered discrepancies in the vendor’s information and worked closely with them to clarify the costs and treatment.
Our research revealed unclaimed allowances due to timing rules, allowing our client to benefit. Through a property survey, we identified qualifying items and applied relevant tax breaks, resulting in significant savings. Our findings were presented to the client and their accountant, ensuring accurate claim submission. A thorough assessment is crucial, even with provided documentation. Our expertise and tailored survey methods led to successful capital allowance claims for the client.
Take a look at the results here
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.