Capital allowances for fixtures: new rules
From April this year, businesses acquiring property must take care not to inadvertently overlook a valuable tax relief, explains The Capital Allowances Partnership’s Steven Bone.
The relief in question is capital allowances, and due to new legislation, making a capital allowances claim for fixtures has become more difficult.
Capital allowances give tax relief to property owner-occupiers and investors for expenditure on so-called plant and machinery. They allow all of the expenditure to be written-off over time - the allowances being given at various rates ranging from 100% down to 8%.
However, it is not always realised how broadly the relief extends to fixtures inherent in the fabric of buildings, such as mechanical and electrical services, and furnishings and fittings. The tax savings depend upon the business's tax rate and property type (some properties being more plant-rich than others). However, typically tax savings are in the region of 5-10% (and as much as 25%) of the money spent to build or buy the property.
This tax saving risks being lost if the new rules are not fully understood.
The long-standing position