Q. What are capital allowances?

A.  Capital allowances provide tax relief for the depreciation of capital assets, principally plant & machinery, including most fixtures in a building used by a business. They take the place of commercial depreciation which is not deductible for tax purposes. The allowances are calculated as a percentage of capital expenditure incurred and are deducted from the income or profit of the business.

Q. Why should you investigate a capital allowances claim?

A. In short you or your company may be entitled to a rebate of tax paid in your last one or two complete financial years. You will also be able to reduce your tax liability in the current and subsequent financial years. Basically if you do not investigate the opportunity to claim capital allowances more of your profits will go to the HMRC instead of back into your pocket or the business.

Q. Is this a tax loophole?

A. No. The basis of the capital allowances legislation can be traced back 1878. Today’s legislation is governed by The Capital Allowances Act 2001 and subsequent amendments made by the government of the time. Tens of thousands of capital allowances claims are processed by the HMRC every year. The legislation is actually there to encourage people to  invest in commercial property.

Q. What does “No Claim = No Fee” mean?

A. We do not charge a fee unless we are sure we can make a worthwhile capital allowances claim on your behalf.  Our initial free, no obligation, High Level Review will give a good indication of our estimated outcome of undertaking a claim for capital allowances and provides the basis for our fees.

Q. Hasn’t my accountant already dealt with capital allowances?

A. This is highly unlikely because to fully exploit the capital allowances on property, a  combination of surveying and specialist taxation knowledge is needed. For this reason,  the majority of accountants are unaware of the full extent of what may be claimed and how to value it. More and more accountancy firms / tax advisers have realised the added value, for their clients, in outsourcing this area to a specialist capital allowance company.  Also, there are many widely held misconceptions among accountants on the subject of capital allowances claims on commercial property.

For this reason we are always pleased to talk to your accountant about the tax relief implications of undertaking a capital allowances claim on your behalf and the majority of our referrals now come via the client’s accountant.

Q. How is my accountant going to react to this?

A. We will work in harmony with your accountant. We only deal with capital allowances claims and other commercial property related tax relief  and no other areas of accountancy.  At the end of the day, your accountant will be aiming to reduce your tax burden by any legitimate means possible.

Q. My accountant says that undertaking a capital allowances claim will result in a higher Capital Gains Tax (CGT) liability on disposal. Is this true?

A. No. This is one of the most commonly held beliefs among professional advisers in respect of capital allowances claims. If requested, we can give you or your advisers the full details about the legislation which makes this clear.

Q. What types of property qualify for capital allowances?

A. Nearly all commercial property which is owned by an individual or company, will potentially qualify for capital allowances provided it is not held in a pension fund or owned by a charity. Commercial property also includes furnished holiday lets (FHL’s) which meet the Government’s qualifying criteria.

Q. How much is this going to cost?

A. We can provide a High Level Review of the potential outcome of undertaking the work. This takes account of your property portfolio and your tax position. This is an offer for you to consider and puts you under no obligation whatsoever. If you accept the offer, and it is subsequently found, for whatever reason, that a claim cannot be made on your behalf then there is no fee to pay.

Q. What about the HMRC?

A. All claims have to be constructed according to HMRC’s and the Valuations Agency Office’ guidelines.  We are experts at presenting the information correctly and in a manner that is acceptable to HMRC. Capital allowances are an entitlement designed to encourage companies and individuals to invest in property. The HMRC randomly choose to investigate a small number of claims for accuracy, and if this were to happen we would deal with any negotiations with HMRC om your behalf.

Q. How far back can you go when claiming capital allowances?

A. In theory,  you can go back to the date when you purchased a property. Claims have been prepared on portfolios going back to the 1970′s.  Any capital allowances identified have to then be brought forward into your first open tax year which is generally the one before your current tax year.

There may be restrictions on claiming capital allowances for properties purchased since April 2014. It is now in the buyer’s interests to consult with us as early in the process as possible and definitely before completion. If not the ability to claim allowances will normally be lost for good.

Q. Can I claim for allowances on furnished holiday lets (FHLs)?

A. Yes. Please see our Blog for full details.

Q. Can I claim Capital Allowances on Solar Panels?

A. From April 2012 HMRC confirmed that capital allowances may be claimed on Solar Panels and other electricity generating equipment. The costs are to be classed as “Special Rates” expenditure although the Annual Investment Allowance, where available, may still be applied.

What changes were made to capital allowances in the budget of 2023?

A. As a result of measures announced at this Budget, businesses will now benefit from:

  • Full expensing – which offers 100% first-year relief to companies on qualifying new main rate plant and machinery investments from 1 April 2023 until 31 March 2026
  • The 50% first-year allowance (FYA) for expenditure by companies on new special rate (including long life) assets until 31 March 2026
  • The Annual Investment Allowance (AIA) providing 100% first-year relief for plant and machinery investments up to £1 million, which is available for all businesses including unincorporated businesses and most partnerships.