Let’s explore this frequent misconception
When a UK taxpayer purchases an item of qualifying plant and machinery that is eligible for capital allowances, they will receive an invoice for passing onto their accountant. An accountant can recognise this purchase as a qualifying item, through the proof of expenditure (the invoice). They will then deal with this using the routine accounting system, and claim for the capital allowances.
Important point: There needs to be a clear and detailed invoice that provides proof of expenditure. Which the accounting system can act on, and does.
This is the basis of an accountant’s genuine belief that any capital allowances have been dealt with because they have dealt with some of them. However, it’s important to understand, that this isn’t all of the capital allowances.
The elephant in the room lives on
An important question to better understand is: ‘If capital is spent, and the details of this purchase are not available, how can the accounting systems treat this accordingly?’
Simply put, it cannot. As a result, capturing the possible tax relief won’t happen. But, you may ask ‘how is it possible to purchase something and not have the details as proof of purchase?’
The clearest examples are Completion Statements and Stage Payments. These types of invoices are passed onto accountants more regularly than expected.
When buying a commercial property, there is rarely a detailed list of the embedded items of plant and machinery. There could be an inventory of furnishing, chattels, equipment, etc. But this will not include details of radiators, toilets, emergency lighting, smoke detectors, or telephone points within the property.
If a building is re-developed, extended, or re-furnished, the work is often completed by a contractor, over a period of time. Payments are often made as Stage Payments and relevant documentation rarely include sufficient, if any detail.
In both scenarios, qualifying items will not be highlighted. Therefore, capital allowances are lost, due to the lack of detail.
Call in the experts
Capital Allowance Review Service has over 20 years of experience, in supporting advisors and their clients with Capital Allowance claims.
We have an expert team of Chartered Accountants, Tax Experts, Chartered Surveyors & Valuers, Property Law expertise, and an Ex-HMRC Inspector. Each has the knowledge needed to enhance an accountant’s routines. Without this, large savings could be missed.
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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.