Capital allowances claims on commercial property acquisitions
3rd April 2012
Posted in Articles, Business Tax, Private Client by Tom Minnikin
If you, or your business has purchased a commercial property (including a Furnished Holiday Let) then you may be entitled to claim capital allowances tax relief on a proportion of your expenditure. This article briefly explains how the relief works, and how we can help you identify whether a claim can be made.
What capital allowances are
Capital allowances are a form of tax relief available to businesses who incur expenditure on acquiring, constructing or fitting out commercial property. It acts as a substitute for accounting depreciation (which for tax purposes is non-deductible).
Items of expenditure which typically qualify for the relief include:
- Air conditioning
- Heating equipment
- Electrical and lighting systems
- Water systems
- Kitchens
- Sanitary ware
Why capital allowances can be overlooked
Our experience shows that capital allowances are often overlooked when a commercial property is acquired. Owners are either unaware that they are eligible to make a claim, or assume that their accountant would have automatically dealt with it.
Unfortunately as these types of claims require specialist skills (for example, property valuations expertise) most accountants would have been unable to deal with the claims by themselves. The good news is that provided you still own the items in question, it is possible that a claim can still be made.
How we can help
Forbes Dawson offers a full capital allowances review service. Working with various firms of surveyors, we have assisted a wide range of businesses in making claims, in many cases resulting in large tax repayments.
Our five step process involves:
- Carrying out a review of the property’s history in order to establish whether or not you are eligible to make a claim.
- Visiting the property in order to identify the precise items of qualifying expenditure.
- Obtaining a professional valuation of the items in order to support the capital allowances claim.
- Preparing a full technical report that your accountant can then submit alongside your tax return as evidence of your claim.
- Dealing with any standard HMRC enquiries.
Preliminary criteria
Capital allowances are potentially available provided the person who owns the property (i.e. you or your business):
- Carries on a qualifying activity. This includes any form of trade (other than trading in property) or rental business.
- Is subject to UK tax in respect of that activity (pension funds, charities or other non-taxpaying entities will therefore not benefit).
Fee structure
We will only charge you a fixed percentage of the amount we identify as qualifying for capital allowances i.e. if there is no claim to be made, then there will be no cost to bear.
Please contact us for further information, and a free consultation.
| Recent case studies | ||||
| Property type | Purchase price | Capital allowances | Tax rate | Saving |
| School | £1.5m | £0.3m | 28% | £84k |
| Office | £15m | £1.1m | 20% | £220k |
| Warehouse | £1.2m | £0.2m | 28% | £56k |
| Retail | £2.5m | £0.4m | 40% | £160k |
| Note: the above examples are for illustrative purposes only. The level of savings depend on your own circumstances and tax position. | ||||
