Capital Allowances
on Property
What are capital allowances?
Capital allowances are a commonly used and valuable form of tax relief that permit the costs of tangible capital assets to be written off against taxable profits. Businesses often overlook their eligibility and lose out on valuable tax refunds that could have been invested back into their business.
£99 billion
Whilst most businesses will be familiar with claiming such allowances for plant and machinery, many will be unaware of the entitlement to claim for certain “fixtures” or “fixed plant” – items integral to the fabric of a building. The building is effectively a machine providing various services to the business, including heating, lighting, security, air conditioning and so on. The relief applies to any property-owning business, whether carrying on a trade or earning rental income and even if the property was built or acquired many years ago, allowances can still be claimed.
Specialist Capital Allowance Services
Capital allowance claims on commercial property is a very specialist area of tax and is rarely undertaken by small to medium sized accountancy firms, this is largely because of the requirement for both a detailed prior tax history and survey of the property.
From Start-Ups to Corporations
Small and large businesses alike claimed approximately £99bn in capital allowances in 2018-19 but there remain thousands of businesses who are completely unaware they can become part of this statistic.
Capital allowances and buying/ selling property
Changes in the capital allowances legislation during 2012 and 2014 had a dramatic impact on standard practice when dealing with fixtures on the sale of commercial property.
Since April 2012, the buyer of a commercial property has had to satisfy the “fixed value requirement” before they can claim capital allowances against fixtures purchased as part of the acquisition. In essence, this requires that the seller and the buyer agree on the disposal value of fixtures (i.e. how much eligible expenditure can be passed to the buyer) via a S.198 election within 2 years of the date of completion.
The subsequent introduction of the “mandatory pooling requirement” (introduced in 2014) requires that the seller identify and “pool” ALL qualifying expenditure prior to the sale (the capital allowance “pool” is a mechanism through which capital allowances can be claimed). Where the seller of the property was eligible to have claimed allowances but didn’t, the mandatory pooling requirement dictates that the buyer will lose any entitlement to capital allowances on fixtures included within the acquisition cost.
These changes have introduced important considerations for both parties in any commercial property transaction and specialist advice is recommended to ensure that the matter of capital allowances on property sale is handled efficiently and effectively. Cost Care Tax have over 20 years of experience of handling such claims and are able to liaise with solicitors who are unfamiliar with the correct procedures to follow in order to protect the allowances, be that in the interest of the seller or the buyer.
The Process
Our capital allowances claim process has been designed to save you time, maximise your claim amount and accurately value your assets when standard accounting procedures can’t.
1. Contact the Business Development Dept at team@costcare.co.uk or by telephone on 0161 904 0044 to discuss claim qualification and contract terms.
2. Once the contract is agreed, a dedicated Account Manager will be assigned to your case and an initial assessment will be made.
3. We will request documentation to research the tax history of the property.
4. Our Technical Team will review all documentary evidence and carry out a full assessment of qualifying activity and expenditure.
5. A highly skilled surveyor will carry out a full site survey of the land, buildings, plant and machinery. Surveys typically take 2-3 hours to complete. Assets are valued
using HMRC approved methods.
6. The Technical Team will combine the site survey with documentary evidence to prepare a comprehensive report that outlines all entitlements and claim sums.
7. The report is sent to the client or accountant for onward submission to HMRC.
Why use Cost Care Tax for your capital allowance claim?
At Cost Care Tax, we have made thousands of successful capital allowance claims, utilising years of accumulated experience to diligently assess and review capital expenditure. We ensure that no stone is left unturned in order to maximise your capital allowance entitlement.
- Your claim managed from start to finish by our team of tax specialists.
- Knowledge and expertise that meets the evolving demands of HMRC legislation.
- A loyal client base in excess of 20,000.
- Maximise the value of your capital allowance claim by combining experience with robust surveys.
- We manage all interaction with HMRC so you don’t have to.
- Claim the value of immovable items which are often missed.
- We have never had a claim overturned by HMRC.
- Our average claim size across all property sectors is £99,000.
- £216,463,576 of capital allowances claimed and still counting….
Are you an accountant seeking a tax specialist to manage your clients’ capital allowance claims? If so, please visit our accountants’ section for more information.
This is a difficult question to answer. There are a variety of different factors to consider, including the nature of the property, timing of the expenditure and the eligibility criteria. The apportionment of acquisition or build-cost that’s attributable to fixed plant and machinery will largely depend on the type of property and trade in question, and can typically range from 5% – 50%. Properties in the hospitality or health care sector are likely to be at the higher end of such apportionment, whereas warehouse and factory buildings are likely to be at the lower level.
In order to claim capital allowances, two basic requirements must be satisfied:
- Capital expenditure must have been incurred as a result of providing plant or machinery for the purpose of a qualifying activity – this covers most commercial business activities.
- The person incurring the expenditure must own the plant or machinery as a result of incurring the expenditure.
- Fixed plant, including integral systems such as heating, electrical and lighting installations.
- Fixtures, for example fitted kitchens, bathroom suites and fire/CCTV systems.
- Alterations to a building to install plant and machinery, but not including repairs.
Cost Care is here to support accountants and your clients - call our team of experts today and refer your client …
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