I think most people currently agree the UK faces an uncertain economic future over the coming year. Most pundits believe economic recovery is still looking fragile so business owners need to be not only concentrating on generating income from customers but ensuring that they reduce costs and do not overpay tax. Remember £1 saved goes straight to the bottom line of your business where £1 in sales will not because of the deduction of fixed costs and overheads.
If an individual owns the freehold on a commercial property (or in certain cases a long lease) they will be entitled to make a capital allowances claim. Capital allowances can be claimed by valuing the property’s “plant and machinery” whether the property was purchased yesterday or twenty years ago. Capital allowances can then be drawn down on an annual basis to protect profits from taxation. For example if you pay corporation tax at 21% for every £1 in capital allowances identified you will save 21p. This may not sound a lot but when you consider anywhere between 10% and 50% (possibly more) of a commercial property’s purchase price and development costs can attract capital allowances you can see why owners need to take an active interest. If for example you own a profitable hotel or care home and you haven’t undertaken a capital allowances claim you need to contact a specialist capital allowances claims company urgently because the HMRC will almost certainly have a large amount of what is rightfully yours and will continue to take more each year until you act.
Hold on I hear you say “I have an accountant that deals with that!”
The honest answer to this is they probably haven’t because to value the”plant and machinery” in a commercial property requires a mix of surveying skills and preferably tax qualifications plus an in depth knowledge of the Capital Allowances Act 2001 and any subsequent amendments including case law. Exciting stuff!
What constitutes plant and machinery?
On my desk is a book which has five pages listing examples of plant and machinery. Some are obvious like air conditioning (including ducting and vents), cooler rooms, generators etc. Less obvious are sanitary installations, internal signs, bicycle holders and racks. My personal favourite being bee hives!
What types of property can you make a claim on?
Any property involved in making a potential profit on which taxes are paid is suitable for making a claim unless it is held in a pension fund. The owners of furnished holiday lets whether in the UK or European Economic Area can make a claim but the government have put in place a number of restrictions which means the owner needs to act relatively quickly to gain the maximum benefit i.e. within the next six months. Landlords who have a portfolio of multi-let properties may be able to make a claim too but certain restrictions were put in place in October 2010 which limits but does not necessarily exclude a claim being made.
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