Capital Allowances on Property Expenditure
Capital Allowances are tax allowances that are available on certain categories of purchases made by companies, sole traders and partnerships . An area that is often overlooked is that there are sometimes significant capital allowances available on commercial property expenditure. Companies and individuals can use these allowances to reduce their tax liabilities on both rental income and trading profits.
Many tax payers do not claim the correct level of capital allowances that they are entitled to because in order to identify these allowances you require combined surveying and tax knowledge. The capital allowances legislation also does not define exactly what can be claimed therefore a thorough knowledge of relevant tax case law is also required.
Unlike many accountancy practices Bracey’s Accountants Capital Allowances team have this combined expertise which helps us to identify the more unusual items of qualifying expenditure which can sometimes be overlooked.
There are two main opportunity areas available;
1. Acquisition of commercial property
Capital allowances are identified by undertaking a just and reasonable apportionment of the purchase price paid. This is essentially a valuation exercise and also requires researching former owner history to determine if any restrictions apply.
2. New capital expenditure on commercial property
Capital allowances are identified by analysing the actual costs incurred and applying the relevant capital allowances legislation to extract as much qualifying expenditure as possible. Relevant expenditure includes;
- New Build
- Fit outs
In order to determine if capital allowances can be claimed we offer a free initial review. This review will include researching a taxpayers entitlement to claim capital allowances and an estimate of the additional tax saving available.
In some cases information can be incomplete, however due to our teams surveying expertise we are able to undertake quantity surveying assessments to help justify claims to HMRC.
We provide a free initial consultation on a no obligation basis.
2012 - New Opportunity
The current capital allowance rules allow retrospective capital allowances claims to be made. This means that it is currently possible to review historical capital expenditure in say the last 10 years and make capital allowances claims in current or open accounting periods. These additional claims often result in a tax refund from HMRC.
From April 2012 HMRC are likely to impose a 1 or 2 year time restriction to make such a claim. This will mean that if tax payers do not carry out reviews to identify these capital allowances they will be lost forever. This restriction will also apply to new capital expenditure incurred after April 2012.
Final details of this proposed change is due to be published shortly. If you would like to receive our updated news letter regarding this matter, please contact us.
"Bracey’s Accountants capital allowances team carried out an initial review of our historical expenditure with minimal disruption. The capital allowances claims submitted generated a tax saving going forwards and a substantial tax refund on our recent tax liaiblities"