Capital Allowances

Property & Land Tax Relief Advisory - Capital Allowances:

Capital allowances are a form of tax relief that allows individuals and businesses to deduct the cost of certain types of capital expenditures from their taxable profits. These allowances are designed to encourage investment by businesses in assets that are essential for their operations. They are a crucial part of the UK tax system and provide a way for taxpayers to reduce their overall tax liability.

What Are Capital Allowances?

Capital Allowances allow businesses to deduct the cost of certain capital expenditures from their taxable profits. This includes:

  • Plant & Machinery Allowances
    Fixtures integral to the function of a property (e.g., heating, lighting, security systems, etc.).

  • Integral Features
    Electrical systems, lifts, air conditioning and water systems.

  • Structures & Buildings Allowance (SBA)
    Relief on qualifying construction costs of new commercial buildings.

  • Enhanced Capital Allowances (where available)
    Available for certain energy-efficient or water-saving equipment.

When Can They Be Claimed?

  • On acquisition of second-hand commercial property

  • On new builds, extensions or refurbishments

  • On fit-outs, developments or conversions

  • Retrospectively on unclaimed historic expenditure

Key Features of Capital Allowances:

  1. Eligible Assets:

    • Capital allowances can be claimed on a variety of assets, including machinery, equipment, vehicles, fixtures, and certain building expenditures. The assets must be used in the business to qualify.

  2. Types of Allowances:

  • There are several types of capital allowances, each with specific rules and rates:

    • Annual Investment Allowance (AIA): This allows businesses to claim 100% of the cost of qualifying assets up to a certain limit in the year of purchase.

    • Writing Down Allowances (WDA): For assets that do not qualify for AIA or exceed the AIA limit, WDAs can be claimed over a period of years at a specified rate.

    • First-Year Allowances (FYA): These allowances provide enhanced tax relief on certain assets that meet specific criteria, allowing for a larger deduction in the first year of purchase.

    • Structures and Buildings Allowances (SBAs) are a form of tax relief introduced by the UK government to encourage investment in the construction and renovation of commercial buildings and structures. This allowance enables businesses to claim a deduction against their taxable profits for qualifying capital expenditure incurred on non-residential structures and buildings.

Our Approach:

  • 1. Initial Consultation & Information Gathering

    · Understanding Your Investment: We start by engaging with you to understand the specifics of your building or structure investment, including the nature of the property, the purpose of the investment, and the associated expenditures.

    · Document Review: Our team will review all relevant documentation, such as purchase invoices, architectural plans, construction contracts, and any other records that detail the investment in the property.

  • 2. Site Survey & Assessment

    · Comprehensive Site Survey: To ensure all qualifying expenditures are identified, we conduct a thorough on-site survey of your property. Our experienced surveyors will assess every aspect of the building or structure to identify all capital allowances opportunities.

    · Detailed Assessment: During the survey, we examine elements such as the building's fabric, fixtures, and fittings. We document these elements in detail, considering factors like the building's age, condition, and any previous renovations or alterations.

  • 3. Analysis & Categorisation of Expenditures

    · Cost Breakdown: Our team will meticulously analyse the data collected from the site survey and document review. We categorise expenditures into qualifying and non-qualifying items, ensuring accuracy in your claim.

    · Identification of Qualifying Assets: We identify assets that qualify for different types of capital allowances, such as Structures and Buildings Allowances (SBAs), Plant and Machinery Allowances, and Integral Features Allowances.

  • 4. Preparation of Capital Allowances Report

    · Comprehensive Report: Based on our analysis, we prepare a detailed capital allowances report outlining all identified qualifying expenditures and the corresponding allowances. This report serves as the basis for your claim.

    · Clear Documentation: Our report includes clear documentation and justification for each claimed item, ensuring compliance with all relevant tax laws and regulations.

  • 5. Internal Westlock Partners Review & Client Approval

    · The Westlock Approval: Prior to finalising the Capital Allowances tax relief report, the report and all calculations prepared will undergo a rigorous internal quality control review process to ensure accuracy and compliance. This review is conducted by our senior specialists who are independent of the initial report drafting team, ensuring an unbiased evaluation. The process includes a thorough examination of all supporting documentation and calculations, verification of eligibility and expenditures, as well as a detailed check for adherence to HMRC guidelines. Any discrepancies or areas of improvement are addressed and rectified before the report is shared with you for your approval and submission. This comprehensive review step ensures that the report not only meets Westlock Partners highest standards of quality and precision but also ensures the claim is maximised to the extent permitted by all relevant laws and guidance.

    · Client Review & Approval Process: We provide the capital allowances report to you for review and feedback. We will address any queries or concerns you may have, ensuring you are fully satisfied with the report before submission. Once we have received your approval, we will proceed with the submission of the claim.

  • 6. Submission & Follow-Up

    · Claim Submission: We assist you in submitting the capital allowances claim to HMRC, ensuring all necessary forms and documents are included.

    · Follow-Up Support: Our team remains available to provide support and answer any questions from HMRC regarding your claim, ensuring a smooth and efficient process.

  • 7. Ongoing Monitoring & Updates

    · Monitoring Changes: We keep abreast of changes in tax legislation and ensure your capital allowances claims are up to date with current laws and regulations.

    · Future Claims: As your business continues to invest in property and structures, we are here to assist with any future capital allowances claims, ensuring you maximise your tax benefits.