Capital Allowances: A Step by Step Guide
Follow our step-by-step guide to understand how to claim capital allowances for your clients and how to avoid some common pitfalls.
What qualifies for capital allowances?
If your client has spent capital buying, and/or improving commercial property, they may be entitled to tax relief. A proportion of the Property acquisition expenditure can be divided to identify qualifying embedded fixtures and fittings (over and above chattels). A breakdown of the qualifying embedded fixtures and fittings is often information that is missing from the property’s completion statement and sales agreement and the rules governing it can be fiendishly complicated. Property embedded fixtures and fittings of different kinds are covered by a complex web of legislation and often governed by time limits for making claims. We focus on highlighting items that enable the building to function as a building, and not just the wall, floor, and ceiling. Items such as heating systems, electrical systems and wiring, lifts and small fittings (door hinges), may be easily overlooked. Door hinges, for example, can come under the category of Plant and Machinery because of their function.
Please note that if your client is renting a property, they may still be able to claim capital allowances through Leasehold Improvements that are carried out.
How our process works
We work alongside accountants providing support and guidance to help accountants to identify if their client has spent capital buying or improving commercial property, and also if they can benefit from a Property Capital Allowance review. A clients’ plans are important – while they may be entitled to make a claim, this is only worth doing if they are paying tax or expecting to do so. It is at this stage the viability of a claim is considered by Capital Allowance Review Service, the accountant, and the client to ensure reputations and relationships are maintained.
See our process here
Once we have established the potential for a claim, the process of calculating the claim is started. A site survey is completed and an inventory of everything in, on, and around a premises is noted. Our team will assess each item and what kind of claim it qualifies for. Formulating the claim value is far from straightforward. A key component is valuing the cost to buy and install each item that is to be included in the claim. The right legislation must also be applied to each claim that is submitted.
The claim is now applied to the client’s tax profile. Our team will amend any previous tax returns and submit to HMRC for any refund due and provide a further 12 months’ support in the event of an enquiry.
A report showing how the figures have been calculated is produced, including copies of any amended tax returns and our invoice. If we are unable to find unclaimed Capital Allowances, the client will typically be charged a percentage of the secured claim, however, if nothing is found, there is no charge. Frequently, the client recovers enough tax to cover all fees and if this is not possible, this is raised at step one before the claim process starts.
Further support is provided so that if the client sells their property in the future, legal support and advice are available to ensure the remaining allowances are dealt with in a manner that best suits the client’s position.
What kind of values are typically found?
On average, 25% of a property purchase cost will have unclaimed embedded fixtures and fittings that qualify for tax relief. This can vary according to the type of property and its use. For instance, a care home may contain up to 35%, while an industrial building is likely to be at the lower end of the scale.
View our Case Studies for inspiration.
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As one of the leading experts on capital allowances, our multi-disciplinary team has helped accountants and their clients to maximise tax relief against property expenditure. With over 19 years’ experience in highlighting embedded fixtures and fittings within commercial property that qualify for tax relief, our focus is supporting accountants...