What are Capital Allowances?
Capital Allowances are a niche, yet substantial tax relief available on properties subject to the expenditure of certain capital assets as a tax allowable expense. Their speciality is why so few people have heard of them, let alone made claims on their commercial properties despite the significant benefits they provide.
If you have spent money on buying, refurbishing, or building a commercial property then you could be viable to make a claim for capital allowances.
How do Capital Allowances work?
It’s not only important to know what are capital allowances, but to understand how they work.
Your property, and the items within it allow your business to operate and as such are a significant business expense that may be claimed against. This includes items you would not typically consider such as:
- electrical systems
- heating systems
- hot & cold water systems
- kitchen equipment
- sanitary ware
In addition many other assets hidden within the fabric of the property may be claimed under Capital Allowances to provide you with tax relief. Specialist firms like Commercial Properties Tax will identify all the claimable assets without your property and compile a report to estimate their approximate value. This value may then be used by your accountant to make a claim for tax relief.
Why are Capital Allowances Important?
In short, capital allowances reduce taxable profits (but not your cash flow), meaning they save you money.
Let’s say you own an office that was purchased for £300,000. It is plausible that approximately 30% of your property value will be identified as capital allowances, creating a claimable benefit of £100,000.
This claimable amount is then applied against your tax rate to provide you with tax relief. So assuming you are 19% corporation tax rate payer you could expect to claim tax relief in the region of approximately £19,000.
If you have paid tax in the last two years then part of the £19,000 may be used to claim a tax rebate, while the remaining amount will be used to offset tax moving forwards until the tax relief is used up. This makes claiming capital allowance a valuable tool for tax planning that should not be ignored.
What to do now?
If you own a commercial building it is imperative that you understand what are capital allowances and that you take action to make a claim today:
We offer a no obligation, free audit of your ability to make a claim so there’s nothing to lose by getting in touch.