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Capital Allowances

What are Capital Allowances?

Capital allowances save money – they are the only means of tax relief for capital expenditure incurred by both UK and overseas taxpayers on commercial property.

You can offset tax on profits by the amount of allowances claimed. Capital allowances therefore reduce taxable profits for companies, businesses and individuals.  

Any property or construction transaction could be an opportunity to claim capital allowances, and when you have made a claim, you should take steps to protect your benefit even if you plan to dispose of the property or asset.

How can we help with your Capital Allowances claim?

Whatever the property type we have a proven approach to setting out claim reports so that HMRC has all the information needed to sign off the claim quickly and with minimal questions.

A tax planning review to identify any additional tax savings on a project can be provided if we are engaged at the project outset.

Our systematic approach and our commitment to investigating alternative types of claims means we consistently improve claims. You can rely on us to generate you a healthy return on the investment of our fee. 


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  • These projects have very high value claims (typically 75%+ of expenditure) and relief at an enhanced rate (100%) is available when designated energy efficient or environmentally friendly items are used on your project.
  • Direct works, fees and preliminaries, can be apportioned in your claim.
  • The identification of qualifying expenditure requires a thorough understanding of the legislation and the ability to analyse construction data such as valuations, final accounts and variations.
  • These projects have very high value claims (typically between 40% and 60% of expenditure) and relief at an enhanced rate (100%) is available when designated energy efficient or environmentally friendly items are used on your project.
  • Direct works, fees and preliminaries, can be apportioned in your claim, but works to structure and land cannot. Residential property generally will not qualify for tax relief.
  • The identification of qualifying expenditure requires a thorough understanding of the legislation and the ability to analyse construction data such as valuations, final accounts and variations.
  • The value of the allowances on a property acquisition are calculated with respect to the purchase price, taking into account the tax history of the property.
  • There is a special formula, called the apportionment formula, that must be applied.
  • Subject to certain restrictions, a substantial amount of the expenditure incurred will be eligible for capital allowances relief. Typically, around 30% of the acquisition costs can qualify for allowances.
  • As when disposing of a property, the new rules introduced in 2014 must be taken account of when purchasing property to ensure you have a valid claim. Please contact us for further information.
  • Provided no other person has already made a claim the new owner can claim them. This is what is called an unrestricted claim.
  • In cases where capital allowances have not been claimed by any past owner, the amount available will be based on a ‘just and reasonable apportionment’ of the purchase price paid, in accordance with CAA 2001, Section 562.
  • The apportionment is subject to restrictions if any historic claims have been made by former owners on items that are still in the building when it is sold.
  • For purchases after April 2014 new rules have created three new requirements that must be taken account of. For more information please contact us.
  • Land Remediation Relief (LRR) is given to encourage the bringing back into use of land that is blighted by previous industrial use or to bring back into productive use long term derelict land. The relief applies to both capital and revenue expenditure incurred on remediating the land.
  • It provides a deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies who clean up land acquired from a third party in a contaminated state.
  • It provides corporation tax relief for projects in all property sectors. Unlike Capital Allowances, LRR is available to property investors and property developers.
  • The “polluter pays” principle applies to LRR. Companies that are responsible for or connected with those responsible for the contamination cannot claim LRR.
  • These were formerly known as scientific research allowances. The allowances are given at 100% in the year the expenditure is incurred, and expenditure can include:
    • expenditure incurred for carrying out research and development, and
    • expenditure incurred for providing facilities for carrying out research and development.
  • This is one of the only allowances on whole facilities or buildings.
  • The expenditure can be incurred directly or on someone’s behalf, provided it relates to the existing trade or a trade that is about to be set up and commenced
  • A person does not need to claim the full 100% RDA but if a reduced amount is claimed the balance cannot be claimed later.
  • R&D Relief is a Corporation Tax relief that can reduce your company or organisation’s tax bill if it’s liable for Corporation Tax.
  • If your company and the project you are working on meet the relevant criteria, it is possible for you to claim tax relief on the revenue expenditure (the running costs of your business) and some capitalised revenue expenditure you have incurred in each accounting period.
  • Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HM Revenue and Customs (HMRC) if you surrender the relief.
  • Please get in contact with us if you would like some more information on how to make a successful R&D claim or wish to determine whether you carry out R&D and qualify for the relief.
  • Enterprise Zones are designed to encourage economic growth and investment. Enterprise Zone Allowances were introduced in 2012 for a five year period to 31 March 2017, but this is now extended for a further three years to 2020.
  • Companies investing in plant or machinery in designated enhanced capital allowance (ECA) sites in Enterprise Zones qualify for 100% capital allowances.
  • The area in which the plant or machinery is to be used must be an Assisted Area at the time that the expenditure is incurred
  • The expenditure must be on new and unused plant and machinery and not on 'replacement expenditure', however where significant additional function is performed by the replaced asset or where it enhances capacity or productivity, the expenditure attributable to the additional function may qualify for EZs
  • The assets must not be leased.
  • CPSE documents were drafted to provide an industry standard for sellers and purchasers to use to exchange information during commercial property transactions. One of the areas covered is Capital Allowances (section 32).
  • Section 32 tries to establish the tax history but is often competed incorrectly, incomplete or inaccurate, causing clients to miss out on the benefit of allowances.
  • It is imperative that Capital Allowances are considered early in a transaction and that the CPSE reflect the correct position.
    • This is true whether a seller has claimed and wants to retain the benefit of allowances or if a seller is a non taxing paying entity or a developer with no entitlement to claim.
    • If a seller or their representatives cannot answer the CPSE questions accurately, a specialist should be involved. As specialists, we can advise and help complete the responses and the elections.
  • Deliberately deceitful responses to CPSE responses by Sellers can result in litigation, termination of the sale agreement and a claim for damages.


WHAT CAN YOU CLAIM?




TYPICAL EXAMPLES



*includes fees, prelims and variations and Stamp Duty Land Tax where appropriate.

**assumes a land value of £21m


Capital Allowances

Capital Allowances

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ON THE BLOG

Jeanette Edmiston comments on the conclusions of the Office of Tax Simplification report into replacing Capital Allowances with Accounts Depreciation.

On the Blog