We’ve pulled together a list of the questions and their answers that we are most frequently asked on capital allowances.

How far back can I claim capital allowances?

There is no time limit to make an historic claim.

The ability to make a claim may depend on the documentary evidence you hold in respect of purchases.

Speak to the Bedrock team today to investigate a claim.

What are capital allowances?

Capital allowances are a tax relief for purchases made of capital items which are used in a qualifying activity.

Qualifying activities include a trade or property business.

If you own a commercial property then it is likely that you can claim tax relief. A large proportion of fixtures within commercial property can qualify for capital allowances but often go unclaimed.

The Bedrock team have an expert understanding of capital allowances relief. Speak to us today for straight talking tax advice.

What is a commercial property?

Commercial properties include the following:

  • Offices
  • Hotels
  • Care homes
  • Shops
  • Warehouses
  • Factories
  • Industrial units
  • Public houses

Expenditure incurred on residential property does not generally qualify for capital allowances unless the property is a furnished holiday letting.

What can I claim capital allowances on?

Plant & machinery – Kitchen fittings, security alarm systems, carpets, gas installations, fire extinguishers, switchgear etc.

Integral features – Cold water systems, space heating systems, water heating systems, ventilation systems, electrical systems etc.

There are vast number of items that can be claimed. At Bedrock, we investigate into further detail than a regular accountant to ensure that no element is overlooked and missed from your claim.

Who can claim capital allowances on commercial property?

Claimants need to be a UK tax payer carrying out a qualifying activity which involves commercial property. Claimants could be individuals, partnerships, companies or trusts.

They will have acquired a property (freehold or leasehold) and may have enhanced/extended a property.

Your accountant will probably be aware of capital allowances however we provide specialist advice which means no element is overlooked. We work with surveyors who have over 25 years’ experience.

Can any business claim capital allowances?

Before a capital allowance claim can be made, the business must be subject to UK tax and be carrying out one for the following activities:

  • Trades and professions
  • UK property businesses
  • Overseas property businesses
  • Furnished holiday letting in the UK and elsewhere in the European Economic Area
What can’t I claim capital allowances on?

A property owner is unable to claim on the following:

  • Items that are acquired under an operating or finance lease, you must own them
  • Land Structures: Bridges, roads and docks
  • Buildings, doors, gates, shutters, water and gas systems
  • Purchases made on the base of business entertainment such as a yacht
I think my accountant already claimed capital allowances, can I investigate further?

Your accountant may have already completed a capital allowance claim, but this is unlikely to include plant and machinery which is fixed within the building.

Our services provide a more thorough and in-depth look. We use a specialist surveyor to identify and quantify the expenditure on fixtures which qualify for capital allowances.

What allowance can I get for the different types of plant and machinery?

Generally relief will be given for plant & machinery at 18% per year. Integral features within a building will receive a writing down allowance of 8% per year.

The AIA will be available for current year expenditure. 100% relief will be given on this expenditure up to £250,000.

What happens to my capital allowance relief when I want to sell my property?

When you want to sell your property you will need to jointly make an ‘Election’ known as the Section 198 election with the purchaser. This is an agreement which fixes the value of the allowances passing to them.

Speak to the Bedrock team today to find out more.

What is HMRC’s role in claiming capital allowances?

HMRC may check the claim submitted on your tax return. Once they are satisfied with the valuations included and your entitlement to make a claim, the claim will be processed. This will often lead to a refund of tax.

What is the “fixed value requirement”?

The vendor and purchaser must formally agree the value of the fixtures transferring within two years of completion.

This is usually done by both parties entering into a Section 198 election.  The value of a fixture set by the election must not exceed:

  • The amount the seller previously paid for the fixture, or
  • It’s actual sale price

If you want to find out more, contact us the Bedrock team today.

What is the annual investment allowance (AIA)?

The AIA can provide accelerated allowances for current year capital expenditure.

It has varied considerably in value over the past few years but is set at £200k P/A from January 2016 onwards.

Expenditure covered by the AIA will qualify for a 100% writing down allowance.

A taxpayer has discretion over which expenditure the AIA can apply to. It is therefore more beneficial to allocate the AIA to items which would otherwise be added to the special rate pool (and receive the lesser writing down allowance of 8%).

If you want to find out more, contact us the Bedrock team today.

What is the pooling requirement?

The vendor must have pooled their expenditure which qualifies for capital allowances.

This basically means that the vendor needs to establish how much expenditure they have incurred on fixed plant & machinery and integral features and add it to a pool (either general or special depending on the type of fixture). They do not actually have to claim any writing down allowances; it is just a matter of recognising what has been spent.

As mentioned above this expenditure could have been incurred as part of an extension or alteration to the property but it’s possible that a significant proportion of this will have been embedded in the price they paid for the property.

If you want to find out more, contact us the Bedrock team today.

Will claiming capital allowances affect my Capital Gains Tax?

The short answer is no, as these are two separate issues.

A capital gain realised on the sale of a property will not be increased if capital allowances have been claimed.

If you want to find out more, contact us the Bedrock team today.

Will claiming capital allowances reduce the value of my properties?

No, this is an unlikely scenario.

In fact the opposite can be true, if you have not met the pooling requirement (and therefore the purchaser cannot make a claim), they may look to negotiate a lower price for the property.

If you want to find out more, contact us the Bedrock team today.

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Call us on 0115 778 8533 for a free consultation.

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