Attention UK Commercial property owners and buyers:

Have you identified ALL the Capital Allowances and the tax savings that are available to you?

£10,000’s… even £100,000’s often unclaimed!

Capital allowances have become a hot topic in recent years, but they are often overlooked and undervalued by commercial property owners. These owners – whether individuals or businesses – incur vast amounts of capital expenditure but are often unaware of the tax relief claimable and the element that qualifies for tax relief.

For every commercial property owner who has genuinely claimed capital allowances, there are many more who are being misadvised or have not fully understood the questions put to them. Businesses who fail to have a capital allowances recovery strategy unnecessarily overpay tax on regular basis.

This is an area where taking specialist advice at an early stage can save future complications, avoid delaying the transaction and generate a significant tax benefit for the commercial property owner.

  • Buyers and owners of commercial property in any sector have a real opportunity to save significant amounts of tax in a way that is encouraged by government.
  • Current and future purchasers should seek expert advice quickly to secure the value hidden in a property transaction.

What is this tax saving?

It is a form of tax relief called “Capital allowances” which you may have come across if you or your business has bought commercial vehicles, a kitchen range or even a computer system and have been claimed by your accountant.  They are one of the few forms of tax planning actively encouraged by the government and are intended to help businesses invest in growth.

Happily, they are also available for larger sums spent on items within commercial property. These sums can include the buying, refurbishing or fitting out of a property, or an extension to an existing property.  Expenditure within a property is harder to quantify than individual items and often specialist consultants work with accountants to realise this value.

How do Capital Allowances work for property?

The two main types of capital allowances that we are interested in are for items we can define as either “plant and machinery” or “integral features”.

Plant and machinery assets in property terms are fixtures that turn the shell of the building into somewhere that can operate a business or trade.  Examples of plant and machinery include toilets, sinks, CCTV, fire alarms and even door closers and handles.

Integral features are larger systems within a building such as electrical and water supplies, lifts and heating/cooling installations.

A capital allowances claim brings the values of all these individual items together and gives a total number that an Accountant can then use to reduce tax.

The tax savings happen at different rates depending on which type of asset they are and when they were bought but almost always they are significant.

Can my business claim Capital Allowances within a commercial property?

Any income or corporation taxpaying individual or entity that spends or has spent money on plant and machinery or integral features by buying or improving a commercial property can claim.

Capital allowances – Good news and Bad news

Most capital allowance claims are carried out on property that was bought at some point in the past – historically there has been no time limit on deciding when to make a claim.  The good news is that any property purchased before April 2014 can still be assessed at any time for a claim.

The bad news is that from 1 April 2014, a buyer has no right to claim capital allowances when they buy.  To claim capital allowances on the acquisition of a property, the buyer will need to negotiate with the seller to ‘pool’ any unclaimed allowances from the previous purchase and spending within the property. Both parties then must agree upon the value to be passed over from seller to buyer.

If this is not done, then capital allowances cannot be claimed by the buyer or any subsequent buyer of the property.

Below an example:

A portfolio landlord has acquired several properties over a long period for £10.8M. The properties sit on the balance sheet of various limited companies and partnerships.

Our specialist capital allowance partners have assessed each property in the context of the various entities that own them and identified allowable items from the point of acquisition and through the period of ownership.  The result is that the client will save more than £300,000 in tax over a number of years boosting the actual yield of the portfolio and giving him a negotiable asset at disposal.

To summarise:

    • Buyers and owners of commercial property have a real opportunity to save significant amounts of tax in a way that is encouraged by government.
    • Owners who acquired before April 2014 can claim at any time.
    • Current and future purchasers should seek expert advice to secure the value hidden in the transaction
    • We work with a team of consultants who have carried out over 1000 claims in this field and are proud to stand by the value they have added to their clients

The value hidden in a property transaction

What is this tax saving?

It is a form of tax relief called “Capital allowances” which you may have come across if you or your business has bought commercial vehicles, a kitchen range or even a computer system and have been claimed by your accountant.  They are one of the few forms of tax planning actively encouraged by the government and are intended to help businesses invest in growth.

Happily, they are also available for larger sums spent on items within commercial property. These sums can include the buying, refurbishing or fitting out of a property, or an extension to an existing property.  Expenditure within a property is harder to quantify than individual items and often specialist consultants work with accountants to realise this value.

How do Capital Allowances work for property?

The two main types of capital allowances that we are interested in are for items we can define as either “plant and machinery” or “integral features”.

Plant and machinery assets in property terms are fixtures that turn the shell of the building into somewhere that can operate a business or trade.  Examples of plant and machinery include toilets, sinks, CCTV, fire alarms and even door closers and handles.

Integral features are larger systems within a building such as electrical and water supplies, lifts and heating/cooling installations.

A capital allowances claim brings the values of all these individual items together and gives a total number that an Accountant can then use to reduce tax.

The tax savings happen at different rates depending on which type of asset they are and when they were bought but almost always they are significant.

Can my business claim Capital Allowances within a commercial property?

Any income or corporation taxpaying individual or entity that spends or has spent money on plant and machinery or integral features by buying or improving a commercial property can claim.

Capital allowances – Good news and Bad news

Most capital allowance claims are carried out on property that was bought at some point in the past – historically there has been no time limit on deciding when to make a claim.  The good news is that any property purchased before April 2014 can still be assessed at any time for a claim.

The bad news is that from 1 April 2014, a buyer has no right to claim capital allowances when they buy.  To claim capital allowances on the acquisition of a property, the buyer will need to negotiate with the seller to ‘pool’ any unclaimed allowances from the previous purchase and spending within the property. Both parties then must agree upon the value to be passed over from seller to buyer.

If this is not done, then capital allowances cannot be claimed by the buyer or any subsequent buyer of the property.

Below an example:

A portfolio landlord has acquired several properties over a long period for £10.8M. The properties sit on the balance sheet of various limited companies and partnerships.

Our specialist capital allowance partners have assessed each property in the context of the various entities that own them and identified allowable items from the point of acquisition and through the period of ownership.  The result is that the client will save more than £300,000 in tax over a number of years boosting the actual yield of the portfolio and giving him a negotiable asset at disposal.

To summarise:

  • Buyers and owners of commercial property have a real opportunity to save significant amounts of tax in a way that is encouraged by government.
  • Owners who acquired before April 2014 can claim at any time.
  • Current and future purchasers should seek expert advice to secure the value hidden in the transaction
  • We work with a team of consultants who have carried out over 1000 claims in this field and are proud to stand by the value they have added to their clients
  • Clients of Domus Holmes Property Group (and Domus Holmes Property Finder) can enjoy a FREE capital allowances assessment with Six Forward, a capital allowances specialist, to see if a property would qualify (almost all do…). Join our mailing list below to download.

About the Author
Ian Brown is Business Development Manager at Six Forward, a capital allowances specialists working with clients across the UK, Europe and Asia (www.sixforward.com) with clients including household names, overseas property investors, hotel and care groups and businesses and private investors across all sectors.

Pin It on Pinterest