Capital Allowances on Commercial Properties: How They Work and How to Maximise Your Claim

Posted July 22, 2021 by ductibles64

If you own a commercial property, you might be one of those who have been unintentionally disregarding the benefits of capital allowances. Here's what you need to know.

If you own a commercial property, you might be one of those who have been unintentionally disregarding the benefits of capital allowances. In case you’re not aware of it yet, capital allowances commercial property are a type of tax relief that can be availed when you buy, construct, or refurbish capital assets — or properties you utilise for profit-making.

How Capital Allowances Work

Businesses in the UK have different means to reduce the amount of tax they’re paying. These include capital allowances commercial properties, which you can claim against your yearly taxable profit.

When you invest in a capital asset (which could range from buildings and renovation costs to equipment and their repairs), a certain portion of each asset’s value is tagged as a daily running cost. This day-to-day cost exists for every year that the asset is deemed useful or profitable for your business. The cumulative running cost is commonly known as depreciation and is considered to be non-taxable.

Because depreciation is a rather huge and vague concept, it follows a special set of rules on how you can use it for tax relief. The term "capital allowances" refers to these rules. The total amount of capital allowances can be deducted from your profit before taxation.

How To Maximise Your Capital Allowances

Not all businesses maximise their capital allowances commercial property. Here are some tips to help you out.

Identify which are your deductibles. Apart from the commercial building itself (this includes residential investment properties that serve as holiday lets), you can also claim capital allowances against integral fixtures (e.g., heating and ventilation), fixtures (e.g., plant and machinery), refurbishment and renovation expenses.

Know your allowances. There’s a so-called First Year Allowance, which is tax relief on qualifying fixtures that have been purchased within the accounting period. Zero-emission goods and vehicles and cars with certain carbon emissions fall under this type of allowance. There’s also the Annual Investment Allowance, which sets a limit to the amount of capital allowances you can claim.

Claim missed allowances. Many commercial property owners have the notion that capital allowances can only be claimed whenever capital expenditures are incurred. But did you know that you can still claim allowances that you might have missed since you first purchased or invested in a capital asset? As long as these assets are used for your business, keep in mind that they can still be considered tax deductibles.

Get help from tax professionals. If you don’t work with capital allowance specialists, chances are you’ll miss many of your deductibles that fall under this type of tax relief. With these experts’ help, you can also be guided throughout the claiming process. They’ll be able to provide you with an estimate and advise you on the best option to undertake. If you choose a reputable firm, you can avail of upfront pricing — and if a significant claim isn’t possible, you can even pay nothing at all.

Negotiate with the HMRC. Capital allowances commercial properties experts can negotiate with Her Majesty’s Revenue and Customs (HMRC) to finalise your claim. If there are required negotiations before you can make the most of your capital allowances, having a tax specialist by your side can help you uncover the tax incentives you’re entitled to.

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Last Updated July 22, 2021