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

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Comments
plummy1's picture

There may be trouble ahead

plummy1 | | Permalink

An excellent summary of the new legislation.

I can see all kinds of potential here for disagreements between property buyers and their professional advisers. Many solicitors have in the past advised clients to speak to their accountants but by the time the client gets round to it the property transaction has been completed. In the future it will not be advisable for the solicitor to take this route because the issue of a capital allowances claim should be dealt with as part of the pre-contract negotiations. The sellers solicitor should liase more closely with the sellers accountant to obtain the capital allowances claims history on the property and the buyers solicitor will have to make sure they obtain the information.

It will be interesting to see how this plays out in practice as I don't think many commercial property conveyancing solicitors will be up to speed with these changes.

 

John Plumridge

www.curtisplumstone.com