All types of property can be considered with the likes of Public Houses, Hotels, Restaurants and Nursing Homes as an example where higher levels of claims can be experienced.

We offer a bespoke service preparing Capital Allowance claims, however do not attempt to provide advice on Tax Planning.

We would be very pleased to discuss your particular requirements without obligation. In the first instance please contact Graham Bartlett, 07808 079205.

CAPITAL ALLOWANCES – “A BRIEF BACKGROUND”
Capital allowances provide tax relief by prescribing a statutory rate of depreciation for tax purposes in place of that used for accounting purposes. They are utilised by Government to provide an incentive to invest in capital equipment, including commercial property, by allowing the majority of tax payers a deduction from taxable profits for certain types of capital expenditure, thereby deferring tax liabilities. These capital allowances are available to owner, occupiers and investors of commercial premises chargeable to tax incurring expenditure on property acquisitions, developments or refurbishments. The capital allowances most commonly applicable to property are those given for capital expenditure on both new and existing industrial buildings and plant and machinery in all commercial buildings.

Other types of allowances, particularly relevant to the property sector, affect hotels, enterprise allowances, certain types of energy saving and environmentally friendly plant and machinery and business premises renovation allowances (BPRA) to provide an incentive to invest in disadvantaged areas which can result in significant cash savings on the renovation of business premises.

The primary legislation is contained in the Capital Allowances Act 2001. Major changes to the system were announced by the Government in 2007 with the majority of these now having taken effect from April 2008, however they are reviewed in the budget annually. The Act sets out strict definitions and provisions for what qualifies to be claimed under capital allowances, however a lot of the claims that we now see are from more recent case law. There is, obviously, a core list of items that will usually qualify in the majority of cases, however many other still need to be looked at on a case by case basis. For example, decorative assets in a hotel/restaurant may be planned but similar assets in an office reception area would, almost certainly, not be. Capital allowances can, generally, be summarised under the following claims:

• Plant and machinery. 20% Writing Down Allowance (WDA), 40% WDA – from April 2009 to April 2010.
• Special rate pool. 10% WDA. Integral features, thermal insulation, long life assets.
• Enhanced Capital Allowances (ECA’s). 100% first year allowance (FYA), energy efficient water conservation technologies tax credits available to loss making companies.
• Research and Development Allowances (Capital items) 100% FYA, revenue costs attract additional tax relief.
• Business Premises Renovation Allowances (BRPA) 100% FYA, renovation of certain own use properties within certain disadvantaged areas for expenditure incurred on or after 11th April 2007, with a scheme scheduled to run for 5 years and was extended in the 2011 budget for a further 5 years.
• Enterprise Zone Allowance
• Annual Investment Allowance (AIA) 100% relief on first £50,000 CA’s per annum.
  

Historic Expenditure
Property investors and occupiers frequently ask whether they are too late to claim for capital allowances on plant and machinery expenditure incurred historically. In most cases the answer is as long as you still own the interest in the property under which you incurred the capital expenditure (and the plant and machinery still exists) you have the same entitlement to the land which is as when you originally incurred the capital expenditure. Undertaking and submitting a capital allowances claim relating to historic expenditure often results in a significant tax refund from the HMRC. Capital allowances are an entitlement, by law, therefore if you have incurred the original expenditure then it is, therefore, your right to the tax benefit.

How do you make a claim?
Capital allowances need to be claimed in order to obtain the relief/benefit. Such a claim needs to be submitted to the Inspector of Taxes in the format of a return either done by ourselves or, more commonly done, jointly with your accountant if they have experience in that field. We will provide a report that details a total qualifying expenditure for capital allowances under the relevant heads of claim. From there, clarification can be gained on the allowances that can actually be claimed in the submitted tax return. We would submit a Capital Allowances report to the Inspector of Taxes along with your tax return. The report details a total expenditure qualifying for capital allowances, including a detailed breakdown of the costs and qualifying assets, together with calculations and analysis explaining how the capital allowances have been calculated providing comments on the legislative entitlement to the allowances. Therefore, whether you own or occupy an existing commercial premises, or whether you are intending to refurbish or develop a new premises detailed analysis from a specialist surveyor in this field could, either provide a significant tax return or a significant additional allowance against planned expenditure on a development project. Taking initial advice on points to consider for new development and refurbishment and taking advice on extracting additional items of plant and machinery, not provided in the usual list, but taken from experiencing case law could add additional substantial amounts of money or potential tax savings.

Parkinson Commercial are regulated by the RICS and work in conjunction with Chartered Accountants. Therefore, both parties deal to a strict code of conduct and regulation.

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