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Capital Allowances are a tax benefit against plant and machinery for the purpose of the trade and they have been around for over a hundred years – and that’s where the problems begin. They have been around for such a long time; most accountants and their clients think they are already being dealt with and that is usually an incorrect assumption.

The fact is, they are dealing with some of them but the vast proportion are undetected.

Example: John Fowler Case Study

Holiday Park
Purchase Cost: £29,000,000
Claim Achieved: £6,700,000

This is not unusual or an exaggerated example.

Capital Allowances allow commercial property owners to claim qualifying items of capital expenditure – also known as Plant & Machinery – as a tax deduction and are a valuable form of relief that can be quite substantial.

But there is a problem – most don’t fully understand what constitutes P&M so when they spend money on qualifying items, they don’t realise it and so don’t have the details to pass to the accountant to claim on their behalf.

Whilst Accountants regularly and comprehensively claim Capital Allowances on moveable items, i.e., desks, chairs, computers, kitchen equipment etc, these claims are supported by invoices provided by their clients. However, the capital allowable items (P&M) that are embedded within the property are usually overlooked as there is often no invoice and can result in claims not being done.

The main category of items missed are usually embedded in the fabric of the building and are simply taken for granted as they will have been purchased as part of a building, installed under refurbishment or during development under stage payments, therefore the details are not clear. These items can include; non-slip floors, lift shafts, fire and security systems, communication, heating systems, sanitation and signage. Until somebody instigates the process to highlight these unclaimed qualifying items, the only way to fulfil a claim is to undertake a full room by room survey of the property to uncover the potential and substantial benefit available to the client.

Warning! In 2014 the legislation changed with regard to Capital Allowances and if you are involved in buying or selling commercial property, it is vital that you take advice as soon as possible because incorrect actions based on inadequate understanding could result in the tax relief being lost forever.

Who can claim the benefit?
The tax benefit is available to the party that incurred the relevant expenditure or purchased the property i.e., an individual, a Company, partnership etc.

How is the benefit claimed?
The claim is used to generate a tax refund where possible and is used as a tax credit to reduce future tax liabilities.


Article by: Paul Roberts

As seen in Issue 8 of The Bottom Line