Capital Allowances

Capital Allowances is slowly becoming one of the few legitimate tax reliefs left available to the property investor.

The Plant & Machinery within your property assets can be used against any income you have to make you richer by reducing your tax bill.

Capital allowances are the sums of money a UK business can deduct from the overall corporate or income tax on its profits. These sums derive from certain purchases or investments, outlined in the Capital Allowances Act 2001. A capital allowance is given instead of depreciation for certain types of asset.

Our Capital Allowances expert confidently offers a no claim, no fee; No separate surveying costs; and these allowances can be claimed on your property, and can be used against ANY income stream. Claiming does not affect your CGT position and he works with your existing accountant to make it a seamless process. 

FIND OUT MORE ABOUT HOW TO REDUCE YOUR TAX BILL

The utilisation of this 135 year old tax relief, is a form of tax depreciation which property owners, both personal and corporate can claim on their tax return (Box 32+34 on the property pages – SA105), but rarely do due to perceived complexities and lack of understanding from general accounting providers.

Anyone who owns qualifying commercial property can claim this after a specialist valuation survey. Properties such as, shops, blocks of flats, offices, hotels, restaurants, care homes, public houses, factories, industrial units or warehouses can be claimed on.

You can claim when buying or developing existing freehold properties, constructing new properties or developing leasehold properties.

The plant and machinery included in commercial property can include fixtures and fitting as well as moveable items like furniture. More integral fixtures can include carpets, air conditioning, sanitary ware, kitchens, heating, emergency lighting, wiring to fixed plant, fire equipment, security systems and telecommunications. The list is lengthy and unfortunately there is no definition of what constitutes Plant & Machinery. However, there is a functional test – the asset must be used in the qualifying activity.

If you are a UK tax payer and do not currently pay tax but do have an income source, you may be able to continue to mitigate your future tax liability, property held in a pension fund or owned by a charity will not qualify however.

 

As a part of Capital Allowances you should also be aware of (the technical bit):-

Enhanced Capital Allowances (ECAs)

ECAs covers expenditure on energy saving plant and machinery that meets the criteria specified on Energy Technology List (ETL) managed by the Carbon Trust on behalf of the Government.  Enhanced tax relief of 100% first year allowance for expenditure (including equipment, transportation and installation) or a credit of 19% for loss making companies is available. 

Business Property Renovation Allowances (BPRA)

BPRA is available on converting or renovating qualifying buildings in designated disadvantaged areas into business premises. The relief is 100% allowances on the qualifying expenditure.

Land Remediation Relief (LRR)

Entitles a company who acquires contaminated or derelict land to enhanced relief for the costs incurred (both capital and revenue) in cleaning up the land. The relief is 150% of the cost or a tax credit of 16% for loss making companies.  Derelict means the land cannot be used until buildings are removed and the contamination must be as a result of industrial activity and includes contamination from for example radon, asbestos, naturally occurring arsenic  or Japanese knotweed.

Independent Scotland for better Capital Allowances?

  John Swinney, Cabinet Secretary for Finance, Employment and Sustainable Growth in the Scottish Government stated this week “We want to create the most supportive business environment we can to help create long-term, secure growth with greater job opportunities and more prosperous businesses.”   First Minister Alex Salmond with Mr Swinney will unveil a report which will set out the “opportunities” ahead, just days before the publication of the SNP administration’s formal blueprint for independence.   The economic report is expected to focus on a “distinct approach” to corporation tax, capital allowances, national insurance and access to finance.   Mr Swinney said: “This week’s report will provide a detailed analysis of Scotland’s economic position and the range of economic policies that any future government of an independent Scotland could use to create a stronger and more prosperous Scotland.   “The government of an independent Scotland may choose to use these...
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New HMRC guidance on Plant and Machinery allowances and professional fees and preliminary costs

    HMRC have issued new guidance for individuals and businesses who, whilst undertaking a building project, incur professional fees and associated costs and need to determine if they can be included in their claim for capital allowances.   Deciding whether these costs can qualify for plant and machinery allowances has always been difficult and until now HMRC have taken the view that “only the part, if any, which relates to services that can properly be regarded as on the provision of plant and machinery can be qualifying expenditure”.   Indeed, in the case J D Wetherspoon plc v HMRC (2007) HMRC maintained that “a trader seeking capital allowances must specifically attribute all expenditure which is capable of attribution, however time-consuming or uneconomic that process may be”.   During the tribunal this view was criticized as this stance would clearly involve the taxpayer having to spend more on attributing preliminaries than...
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Budget 2012 - Main points relating to Capital Allowances by Arthur Kemp

      Capital allowances - abolition of Flat Conversion Allowances   As previously announced the abolition of flat conversion allowances will go ahead for expenditure from 1 April 2013 for corporation tax and 6 April 2013 for income tax payers.  Flat conversion allowances are 100% capital allowances for expenditure incurred in converting empty or underused space over shops and commercial premises for residential use. The abolition of flat conversion allowances will affect commercial landlords converting upper floors above shops into residential flats.   Capital allowances - business premises renovation allowance   The business premises renovation allowance (BPRA) is a 100% first year allowance available for expenditure on converting or renovating unused commercial properties in disadvantaged areas that have been vacant for 12 months or more, incurred in the five year period from 11 April 2007. As announced at Budget 2011, the BPRA scheme will be extended a further 5...
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Budget 2011 - Impact on Capital Allowances

“Capital Allowances and other fiscal incentives look likely to continue to play a key role in the Government’s plans for growth... ”   (Archived article) A summary of the main points affecting Capital Allowances tax relief within the Budget. In General The items which qualify as assets for HMO, Multi-lets, Commercial and existing FHL properties have not changed and tax relief can still be claimed on your property. HMO and Multi-let Properties HMO owners can still claim between 7% and 20% of the purchase price of the property in allowances, depending on purchase date. The tax relief is available against any taxable income.   Commercial Properties Commercial property owners can still claim between 15% and 50% of the purchase price of the property in allowances, depending on the purchase date and type of commercial use. The tax relief is available against any taxable income of the owner. Writing Down Allowances It...
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Take advantage of £50,000 - Annual Investment Allowance, HMOs and BTLs

Article Archive In April 2009, we saw a new change in the property investment front, a new tax benefit open to all Buy to let owners, commercial investors as well as variants like those with HMOs. If you own a property, you may be able to review your outgoing costs for items which will qualify for Capital Allowances. Previously these allowances have been set at 50% in the first year then 25% of the balance that remained. The property owner used to call me out to review many items that they would buy. The commercial client would have a survey typically to review these items. Since 2009, these costs could be claimed 100% but only up to £50,0000 and then over that level just 20% can be claimed each year. It is expected many HMO and Commercial owners will benefit the most but it is possible for others to get some...
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