What are capital allowances?
Capital allowances aren’t a tax-avoidance scheme – this is only about good tax housekeeping, making the most of government-backed tax relief.
Claiming can result in a cash rebate from HMRC, or a reduction in current and future tax bills, or both. Claims won’t affect your capital gains tax or reduce the value of your property.
This really isn’t too good to be true. See our FAQs page for further reassurance.
Who can claim capital allowances?
If you are an owner of commercial property and pay UK tax, you can claim capital allowances on qualifying fixtures in your properties.
Capital allowances tax relief is available on virtually all types of commercial property, as long as you own the property, have incurred the expenditure and are using it for your business.
All commercial premises contain ‘plant and machinery’ (as defined for tax purposes), which may be written off for tax purposes. These include fixtures such as electrical, water, heating and sanitary systems, and many other assets. Unfortunately, most accountants are unable to value all fixtures correctly, or to keep up to date with all the changes to capital allowances legislation.
”Louise has always been terrific to work with and has achieved fantastic results in claiming available capital allowances across different sectors.
Peter 'Harry' HarrisDirector, SUSD.London
How are capital allowances calculated?
The tax rebate varies, from 6% for expenditure on an electrical system, to 100% relief for R&D allowances.
The amount of tax relief available depends on the types of assets purchased and the types of capital allowances available. See some examples of savings below, but don’t worry about how you would value your company’s assets – that’s what we do best.
This isn’t only relevant to new construction expenditure – in some cases, allowances can also be claimed on second-hand property purchases and furnished lets.
We work on a ‘no win, no fee’ basis. If we find out that you are not eligible for capital allowances, you won’t pay a penny for our initial investigations.
Examples of assets that commonly qualify for 18% allowances
Fire alarms
Demountable partitions
Sanitary fittings
Carpets
Furniture and fittings
Catering equipment
Dock levellers
Racking
Manufacturing equipment
Swimming pools
Demountable partitions
Sanitary fittings
Carpets
Furniture and fittings
Catering equipment
Dock levellers
Racking
Manufacturing equipment
Swimming pools
Examples of integral features (IFs) that qualify for 6% allowances
Electrical systems
Hot and cold water systems
Heating, ventilation and air conditioning systems (HVAC)
External solar shading
Solar panels
Hot and cold water systems
Heating, ventilation and air conditioning systems (HVAC)
External solar shading
Solar panels
RDAs can be claimed on all associated capital costs in creating the physical space that the R&D is taking place in.
The Year 1 R&D allowance is 100%
Have you changed anything about the way you make or do something?
Have you added to your technical knowledge in the process?
And have you had to overcome challenges to make those changes work?
Have you added to your technical knowledge in the process?
And have you had to overcome challenges to make those changes work?
Key aspects of tax relief under the new structures and buildings allowances (SBAs) category of capital allowances
Contracts entered into after 29 October 2018
Relief given at 3% straight line basis
Lands costs and planning fees are excluded
Expenditure on residential (dwellings) is excluded
SBAs cannot be set against the AIA
An allowance statement will be required by HMRC if a valid claim is to be made
When a property is sold, unused SBAs will pass to the new owner and the seller will keep what they have claimed so far
Relief given at 3% straight line basis
Lands costs and planning fees are excluded
Expenditure on residential (dwellings) is excluded
SBAs cannot be set against the AIA
An allowance statement will be required by HMRC if a valid claim is to be made
When a property is sold, unused SBAs will pass to the new owner and the seller will keep what they have claimed so far
Why are so many capital allowances not claimed?
All accountants know about capital allowances, but most have difficulty in identifying and valuing the tax assets eligible for relief.
It’s estimated that 90% of capital allowances are not fully claimed.
Capital allowances law is especially complicated regarding second-hand property, where calculating the claim requires an apportionment of the price between land, buildings and qualifying assets. This is surveying based tax valuation – accountants don’t know enough about surveying, and surveyors lack the necessary tax knowledge.
See our ABOUT page for information on Barth Consulting’s unique set of skills. We will work in close partnership with you and/or your accountant to maximise your capital allowances.
