What are Capital Allowances?
Capital allowances are an allowable tax deduction against expenditure on plant and machinery for use in your business, and the tax savings can be quite significant, especially with increased super deductions.
All UK taxpayers that have an interest in commercial property ie own or lease and have incurred capital expenditure under that interest can claim.
Unfortunately, the level of allowances is regularly changed by subsequent Governments, but the have reached levels of 130% relief with the Super Deductions which were abolished in 2023. So, the amount of tax saving achievable will depend on the property type and the specification, but on a new office construction up to 100% of your expenditure could qualify, some expenditure obtaining 100% tax relief in the first year.
Typically, elements such as air conditioning, wiring, heating, lighting, carpets, WCs and security systems will qualify for plant and machinery allowances up to 100% and roof, walls and floors at a lower 3%.
Examples of why items are missed
HMRC have long said that for many reasons capital allowances are under claimed. A few of the reasons we have found to claims being missed are:
- Property acquisitions can include inventory for moveable items only, however, details of the embed property fixtures & features eg heating, fire alarms are often not provided and need to be apportioned from the purchase price paid. Many assume that the inventory list is all that they can claim on, and miss the valuable embedded plant and machinery.
- Taking a percentage of the property cost can no longer be applied, and many accountants do not have access to resources to value the land and replacement building costs to maximise the embedded allowances.
- The invoices for property improvements/alterations lack the detail required to assess qualifying expenditure, and items that qualify cannot be seen by typical accounting practices.
- Complex legislation applied to claiming capital allowances is often not understood or wrongly applied meaning allowances are often lost on property purchases.
As you can see, the eligibility and value of the claim depends on multiple criteria and assessing this is complicated, however, we can take this stress from you and unlock your tax savings.
