What are capital allowances on commercial property?
A Government tax incentive/relief which can be deducted from your corporation, tax bills, or taxable profits on property-related expenditure. As a commercial property tenant, you can claim capital allowances for your purchases on capital items that will benefit your business in the long term.
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What qualifies for capital allowances?
You can claim capital allowances on plant and machinery or items that you use for your business, including heating, lighting, electrics, security, IT, carpets, furniture, racking, shelving, machinery, cranes, trade-related installations, mezzanines, floors, ceilings and walls. You may also claim tax relief from the refurbishment or redevelopment of the premises and the fitting out of the property.
What is the capital allowances rate?
There are two different rate pools for capital allowances and you will need to group the items based on each rate. With the main rate pool, you can claim 18% tax relief on all plants and machinery (e.g. cars, fitted kitchens, bathroom suites, alterations to the building). Alternatively, the special rate pool lets you claim 6% tax relief on solar panels and integral features (e.g. lifts, heating systems, air conditioning, electrical system). You can find out more about the capital allowances rate on the government website here.
How is capital allowances on commercial property calculated?
For every £50,000 of qualifying Capital Allowances the following tax savings can be achieved:
- Company paying 19% corporation tax: £9,500
- Partnership / Individual paying 45% income tax: £22,500
For two years from 1 January 2019 the amount of tax relief available to write off in the year of expenditure is temporarily increased, significantly improving cash flows, so consideration should be given to the timing of planned expenditure.
How do I claim capital allowances?
Generally, you can claim capital gains from particular assets you owned, hired, or leased. Your accountants will claim Capital Allowances on loose machinery. However, it might be more difficult to identify fixtures that are part of the building’s fit-out and ruled by case law. In most cases, you may need a specialist chartered surveyor. Additionally, accountants often miss various ancillary costs which can attract tax relief due to the specialist nature of the legislation.
By leasing with Industrials, you can claim your tax relief through an easy process. If planning fit-out or refurbishment works within your property, contact Veritas Advisory for an initial free desktop estimate of allowances, including potential tax savings. If you are unsure about your capital allowances, get in touch with your Customer Engagement Manager, or you can email us or call us on 0800 122 3330 for more information.
FAQ about Capital Allowances on Commercial Property
What are the benefits of capital allowances on commercial property?
By claiming capital allowances, you can improve the cash flows of your business, reduce the risks for lenders, reduce the remaining balance of capital expenditures on plant and machinery, and maintain and increase the value of your assets.
What is the capital allowances time limit?
There is no time restriction to review historic expenditure, so even if works were carried out five years ago and no Capital Allowances have been claimed, you are still entitled to submit a claim now on that expenditure.