Print Posted by George Morina on 01/23/2017

Capital allowances are one of the most beneficial and overlooked tax claim in the UK

Capital allowances are one of the most beneficial and overlooked tax claim in the UK

Capital Allowances

Most people associate Capital Allowances with buildings, and while we know the requirements are as follows we ask that you also note

Most commercial property owners are unaware of the tax they can claim back in the form of capital allowances. This can often result in the rebate of thousands of pounds, Her Majesty’s Customs and Revenue owes billions of pounds to commercial property owners in unclaimed capital allowances, so what can lenders do to assist their borrowers claim back what is often tens of thousands of pounds per property? At the moment our average claim is over £100,000

Capital allowances are one of the most beneficial and overlooked tax claim in the UK; we estimate that shockingly an estimated 96 per cent of all UK commercial property and furnished holiday lets could be entitled to a refund.

So, what exactly are capital allowances? Capital allowances are costs that businesses incur which can be reclaimed against tax as defined by the Capital Allowances Act 2001. They cover a wide range of commercial property from hotels, retail, industrial and multi-let properties. There are pretty much no exclusions; they can’t be held in a pension fund, by the Government, charity or treated as stock, there is no limit as to the purchase price, and the owner must be a UK taxpayer, but this includes individual, LLPs, plcs and Ltd companies.

Currently, it is fair to say that most commercial property owners are unaware they are eligible for capital allowances and the same is true for many professional advisers, especially accountants where there is often a significant knowledge gap. It is worth stressing at this juncture that capital allowance is not a contentious tax avoidance scheme or loophole, but is based on established UK statutory law dating back to 1878. And the primary aim was to allow commercial property owners to improve their property.


Long-term assets

Capital allowance can be seen as the writing down of long-term assets used in the business. These assets will typically be used for several years and the cost of the asset is spread over this life. Tax authorities have estimated the useful lifetimes of the major classes of long-term assets and have also prescribed how to compute the capital allowance over this period. While most businesses already claim allowed capital allowances on moveable assets such as plant, furniture and office equipment, that is not typically the case for buildings.

This happens because the rules for computation of capital allowance on buildings are complex. Individuals cannot claim a specified percentage of the total value of the building. Instead, they must identify the “moveable” items, such as light and water supply fittings, the air conditioning plant and so on, value them and then claim capital allowance on this value. This is further explained later on in this article.

There is no time limit for making capital allowance claims, and commercial property owners can save a significant amount of tax by getting an expert to help them make these claims. Indeed, specialists can often identify anything from 20 – 50 per cent of the original purchase price as capital allowances that can be used against taxable profits

Claims

Claiming back capital allowance is thought to be a complicated process, which has in the past put off a significant number of commercial property owners from claiming. Even though most tax advisers are aware of capital allowance, often the legislation is counter-intuitive and opportunities for claiming back the sums owed are often missed. It is also an area that not all accountants are overly familiar with, and often different specific skill-sets are required to identify and make a claim.

Many commercial property owners aren’t entirely sure what items they can claim on, which is in truth understandable. Firstly, they need to understand the difference between what is called ‘First Fix’ and

what is called ‘Second Fix’. Individuals claim on ‘plant and machinery’ from what is known as the Second Fix when they claim.

So, capital allowances are allowed as a deductible expense for computing taxable income and allow long-term expenditures, such as on buildings, plant and machinery and furniture, to be written off as expenses over their expected useful lives.

Claiming process

The process for making the claim is actually fairly simple. Firstly, surveyors or valuers need to identify those items that can be claimed for and produce a detailed report stating clearly why the items are eligible. In addition to being accurate, the report must also be in a format approved by HM Revenue and Customs. From here on in any professional adviser who is familiar with the process should be able to make a satisfactory claim within a matter of weeks. To save time and hassle we would advise using a specialist company and ideally one that offer a no win no fee service as the costs of pursuing a case that delivers no value can be expensive.

And remember no win no fee,

we only get paid on results.

Contact

Radcas Ltd
Harvey Adam House Brandon Suffolk IP27 0NZ

Tel: 01842 814625

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