What are Property Capital Allowances and can you claim them?

Buying Property

When you’re buying commercial property, it’s important to know what the seller has already claimed or intends to claim for their capital allowances. Their actions (or inaction) can affect how much relief you can claim, so it’s essential the transaction is understood and the correct provisions written into the sale contract.

You need to find out if the seller has already claimed allowances; if not, determine whether they will do so (or able to) before selling the property. Without this, you as the buyer may not be entitled to claim allowances on a second-hand property.

Remember that your commercial property also includes moveable fixtures and fittings (chattels) and plant and machinery. These are likely to have been written down as ‘writing down allowances’ for depreciation, which must be taken into account both in the sale price and ongoing allowance claims.

Buying commercial property with the intention of claiming allowances can be complicated and difficult thanks to confusing legislation. If you want to make sure you’re maximising tax relief potential on a new or second-hand commercial property, speak to us before arranging the sale.

Furnished Holiday Lets

There are extra rules regarding capital allowances if your business involves running furnished holiday lets (FHLs).

To determine whether your property is an FHL it must meet the following criteria:

• It must not be your place of residence;
• The property must be within the UK or the EEA;
• It must be fully furnished for normal occupation;
• You must intend to make a profit from letting the property out; and
• The property must be available to let 210 days every year (this does not include any time you or friends and family stay in the property).

You must have let your property on a commercial basis for at least 105 days in the tax year to apply for capital allowances. If you don’t meet this threshold, you can either:

• Average the days between another FHL you own in the UK or EEA, or
• Elect for a period of grace, if your property goes above the required 105 days some years but not others.

How do we Calculate Your Property Capital Allowances

1. Do Our Research

If you haven’t claimed any Property Capital Allowances you could claim allowances from previous years of your business. We would review all available paperwork relating to your expenditure on your commercial properties since you started trading.

This information should ideally include all fixed and movable asset registers, from fixtures and fittings to plant and machinery, as well as costs of purchasing a property. We would also review your tax position to ensure if a claim can be made, that it’s understood how your tax position will benefit specifically.

2. How do We Work Out Your Qualifying Assets

Our qualified property surveyors and valuers understand property, know what embedded fixtures & fitting are required for a property to function.

Our qualified capital allowance experts have the required understanding of legislation and apply this correctly to your property expenditure.

The combination of property law, surveying, valuation, accounting, taxation and capital allowance disciplines are crucial in order to maximise a legitimate Property Capital Allowance claim.

3. How do We Apply Your Claim to Your Tax Position

When we have worked out the value of your capital allowance claim, it’s time to add these to your tax return.

Our qualified tax experts ensure a claim is applied to your tax position in the most tax-efficient way.

Remember, a retrospective Property Capital Allowance claim can be applied to ‘open tax returns’. This enables us to submit an amended tax return to HMRC on your behalf with the aim of recovering the paid tax.