Eligibility for Capital Allowance Relief
When building a commercial property, a substantial level of the expenditure incurred will be eligible for Capital Allowance relief. The expenditure is based on certain plant and machinery within the property that are usually hidden within the fabric of the build.
Whether you utilise your own employees to construct the property, or your contract a builder, there will likely still be Capital Allowances available to you. An exception to this is when a developer is constructing a property to be traded, making the expenditure contra capital expenditure. Other exceptions may be if the property is held in a pension fund, or by a charity for example.
Identifying Claimable Expenditure
Once your build is complete, it is important that you engage the services of a Capital Allowance expert to evaluate the potential claim you may due for tax relief on the build.
This is because identifying what expenditure within the property build is eligible to claim Capital Allowances is not simple, and qualifying the items may not be obvious, even when the property owner holds detailed records of the expenditure incurred. Even qualified accountants are unlikely to be able to conduct the Capital Allowance identifying process for you as it is a niche area that few in the UK practice.
Deciding what is Eligible to Claim
While there may not be a definitive explanation of the exact items which qualify as plant and machinery for tax purposes, Capital Allowance experts can apply tests developed through century’s old case law to decide what can and cannot be claimed.
Ultimately, what can be claimed comes down to what type of business is being run by the property owner, as well as the nature of the items looking to be claimed.
What Amount can be Claimed?
Once items that can be claimed have been identified, it is usually the case that anywhere from 20% to 40% of the property build cost can be claimed in Capital Allowances. But it can be higher.
This value of identified Capital Allowances may then be applied against your relevant tax banding to provide you with direct tax relief that can be applied against the previous 2 years profits, and help reduce tax being paid going forward.
It is important that once you obtain a Capital Allowance report detailing what your claim is on your property that you speak with your accountant about the most tax efficient manner of utilising the report as possible.
Your Next Steps?
If you are building a commercial property and believe that you may be eligible for Capital Allowances get in touch today to see how we can help.
We offer a no obligation, free audit of your ability to make a claim so there’s nothing to lose by getting in touch.