What Are Capital Allowances?
Capital Allowances are a form of tax relief…
CAs are a form of tax relief available to individuals and businesses who invest in qualifying assets. Such as commercial properties, machinery, and equipment. By claiming capital allowances, property owners can deduct all or a portion of the cost of these assets from their taxable profits. This helps to reduce their overall tax liability.
In respect of commercial properties, CAs allow tax relief to be claimed on certain fixed assets that are “embedded” within the property. These assets may include features such as heating systems and electrical installations. Plus, air conditioning, lifts, and other integral components of the building.
How Do Capital Allowances Work?
Capital Allowances are claimed yearly and deducted from taxable profits…
CAs work by allowing property owners to write off the cost of qualifying assets over a specified period in their tax returns. This process is similar to how assets are depreciated in the accounts and are calculated using specific rates set by HMRC. The rates vary depending on the type of asset and its expected useful life.
CAs can be claimed annually and are deducted from taxable profits. This reduces their tax liability, allowing them to retain more of their income. It is important to note that capital allowances can only be claimed on assets used for business purposes.
Different types of Capital Allowances
CAs encompass various pools and types of relief. The pools include the
- Special rate pool, also known as integral features,
- General pool, also known as the main pool (plant and machinery, fixtures, and fittings),
- First-year allowances (FYA) provide immediate tax relief on newly purchased assets,
- Annual Investment Allowance (AIA),
- Full Expensing (from 1 April 2023),
- Super-deduction (up to 31 March 2023),
- 50% First-year Allowance, balancing allowances may apply when disposing of assets
What are Property Embedded Fixtures & Fittings?
Property Embedded Fixtures and Fittings or PEFFs for short, are an aspect of capital allowances that are frequently missed.
Items classed as PEFFs are embedded in the building. Or more simply put, if you turned the building upside down, these items would remain inside the building. Embedded items could be screwed, nailed, plastered or even bricked into the building.
In fact, these items can present a significant tax benefit, which is often overlooked. These ‘immovable items’ can take the form of many different parts of the building but common cases are heating and air conditioning systems, security cameras, lifts and much more.
Importance of Specialist Consultants
How a CA specialist can support…
Navigating the complexities of CAs can be challenging. Especially for those spending capital on property with limited knowledge of tax legislation, property law, surveying & valuation expertise, etc. This is where capital allowance consultants come into play. These professionals specialise in identifying and maximising capital allowance claims for their clients, ensuring that they receive the maximum tax relief available.
Capital allowance consultants have in-depth knowledge of legislation. Our team stays up-to-date with any changes or updates in the field. They conduct thorough assessments of commercial properties to identify qualifying assets and calculate the allowable capital allowances.
Take a look at a selection of our case studies...
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.