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Capital Allowances on Commercial Properties

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Business owners are forever on a quest to reduce their tax bills. Many are unaware however, that one way they can do this is by claiming capital allowances on their commercial property, through which they can offset the resulting tax relief against their taxable profits. It has been estimated that just 10% of UK businesses have taken advantage of tax relief in this way. 

Capital allowances often go unclaimed due to a lack of understanding of the relevant legislation; property owners do not realise that many of the integral fixtures and systems within their buildings are eligible.

It is worth noting that capital allowances cannot be claimed for the properties themselves. Nor can they be claimed for some of a building’s structural aspects. These include, but are not limited to; doors, ceilings, floors, walls, windows, stairs and gates, as well as the structures used to house lifts and escalators (though as discussed below, the lifts and escalators themselves are eligible). 

Capital allowances may also not be claimed on the following:

  • Fire safety systems
  • Water, gas and electricity systems
  • Drainage and sewage systems
  • Waste disposal systems

However, a wide range of items do fall under the remit of capital allowances and are known as ‘Plant and Machinery’. They are divided into two categories and a list of the most common items is provided below, though is by no means comprehensive. 

Integral

  • Lifts, escalators and moving walkways
  • Space and water heating systems
  • Air conditioning and air cooling systems
  • Hot and cold water systems(not kitchen and WC facilities)
  • Electrical and lighting systems
  • External solar shading

Fixtures

  • Fitted kitchens
  • Bathroom suites
  • Fire and CCTV systems

In order to qualify, the property owner must demonstrate that the items are used by the business as part of ongoing trade. All items must be owned directly by the company; items on lease are not eligible. Companies can make claims no matter how long they have owned the property and allowances can be used against profits immediately. Companies do not need to claim capital allowances at the point of expenditure. With the right support, it is possible to claim allowances dating back a number of years, even to when the property was purchased. Owners should still be able to claim their allowances provided that the equipment is still in use within the business. 

Identifying eligible expenditure can sometimes be a daunting process. Businesses are therefore advised to employ experts to carry out a room by room survey to establish how much can be claimed. 

The level of tax relief available is dependent on the item; value can vary from between 15% and 45% of the cost of the items. Capital allowances on commercial properties can therefore prove highly valuable. 

MCC Accountants: Tax Advisors in Salford

For more advice on reducing your tax bill, or for assistance with claiming capital allowances, please contact our team of tax advisors in Salford. We employ a number of dedicated specialists as part of the Tax Services Team. They can assist you in reducing your tax expenditure, firmly believing that personal wealth creation should be retained by the creator. Our mission is to assist you in maximising your finances, whilst minimising your tax exposure via a series of tried and tested legal methods.