Capital Allowances on Properties

As far as tax relief goes, Capital Allowances is a type of tax relief that could bring with it significant tax savings if it claimed against the expenditure that relates to a property. However, Capital Allowances are only applicable to owner-occupiers, companies, partnerships, small enterprises, individuals and those investors who are located overseas.

Who Can Make a Claim for Capital Allowances?

Anyone who has owns a property, regardless of whether it is a freehold property or a leasehold property or even as a tenant and is susceptible to capital expenditures through either acquiring the property, developing it from new or refurbishing the property will be able to claim capital allowances. Every single building type fall under Capital Allowances and this includes everything from office buildings to industrial property and retail properties. There is one specific exclusion to make note of which is that of a dwelling home which is a house or a flat, although a flat which might contain a plant room and other common areas can be claimed on. The same can be said for residential care homes and student accommodation.

What Are the Benefits of Claiming?

To take advantage of, and benefit from Capital Allowances, the property must be business premises or an investment property that earns you an income. If a property has been built by a developer and held as trading stock, then this will not be open to Capital Allowances. As Capital Allowances is a form of tax relief, it means that you must be paying tax, therefore, non-taxpayers such as pension funds or charities cannot make a claim.

The Value

One of the main things to consider when understanding Capital Allowances is that they can be very valuable, especially on commercial properties. While there are a number of variables to consider, it might be possible to obtain a tax relief of anything between 15% and 45% of the cost of a property. Something as simple as a warehouse would be positioned at the lower end of the scale but an upmarket hotel or a care home would be around the top of the range.

Making Your Claim

When it comes to making a claim, it is important that you get it right. Therefore, as an example. If you have a tax year end of the 5 April 2020, then all Capital Allowances expenditure made during the preceding 12 months would go into the 5th April 2020 tax return. For companies, the date would be the 5 April 2021 and for individuals, it would be 31 January 2021. This would then provide them with the ability to claim up to £1million of the qualifying expenditure as the Annual Investment allowances as opposed to claiming these allowances at the standard rate over the course of several years.