Capital Allowances on Property

Our article explains in what situations you can claim Capital Allowance for your Property.

Capital Allowances on Property
Claiming Capital Allowance can be of huge value to your business.

(4-minute read)

We will cover:

  • What qualifies as Plant & Machinery in Capital Allowances
  • How properties can be eligible to claim this tax relief

What are Capital Allowances?

Under the UK tax system, a tax relief called Capital Allowance may be available for certain types of business expenditures.

If a business is using certain assets, capital allowances let the business write off the cost of the assets over a number of years against the taxable income of the business.

Before selling or buying a commercial building, it could be useful to find out if any capital allowances are available.

What buildings qualify for Capital Allowances? 

Some buildings may qualify for Capital Allowances, such as commercial buildings and furnished holiday lets.

Even if the allowances are not available for the building itself, they apply to plant and machinery (P&M) within the building such as:

  • Lifts
  • Heating systems
  • Air conditioning
  • Sanitary ware

Find out more about what constitutes plant and machinery here.

What qualifies as P&M is not straightforward.

If the item does qualify, you can deduct some or all of the value of the item from your profits before you pay tax.

To do this, you need to work out the value of the item. In most cases, this corresponds to how much you paid for the item.

But the market value can also be used, which is how much you’d expect the item to sell for.

If you let out residential property

You can only claim for items in a residential property if your business qualifies as a furnished holiday lettings business.

In that case, Capital Allowances would be available to claim for fixtures such as heating, electrical systems, sanitary ware, among others. However, this needs to be surveyed carefully.

Claiming capital allowances for structures and buildings

If you build, buy or lease a structure and all its construction contracts were signed on or after 29 October 2018, you may be able to claim tax relief.

You need to have paid some or all the costs towards the purchase, construction or renovation of the structure in order to claim these allowances.

Capital Allowances on Property

When a property is sold, if the seller has been claiming Capital Allowances for plant and machinery within the building, these are seen as fixtures for land law purposes.

Before making a claim, you will need to work out what part of the sale proceeds are attributable to the assets which qualified for allowances.

This figure will need to be brought into the seller’s Capital Allowance computation.

Similarly, a buyer that is hoping to claim allowances will need a figure if they want to claim Capital Allowances for P&M.

Capital Allowances are available on capital expenditure when buying or building commercial property or furnished holiday lets.

Even though this is a valuable tax relief, it is often overlooked.

Less than 10% of UK commercial property owners have made a claim. This means that more than 90% of property owners could have huge sums of money waiting to be claimed.

Whether you are eligible for Capital Allowances is based on a case-by-case scenario, you should always seek specialist help.

HMRC needs to run a series of tests to determine whether a property qualifies for Capital Allowances and making a claim without complying to the rules might mean paying extra costs later.

Here at Tax Expert, we make sure you have all necessary documentation before making a claim. Contact us today to find out whether you can claim Capital Allowance.

Contact us today at 01772 788200 to find out more about how we can help, or WhatsApp us out-of-hours at 07787 010190.

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