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Capital allowances are a tax relief available to businesses which they can claim for capital expenditure. Instead of deducting the full cost of an asset from profits in the year it’s purchased, businesses can deduct a portion of the asset’s value over time, reducing their tax liability. Capital allowances are not provided automatically and must be claimed in a tax return.
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Capital allowances can be claimed on capital expenditure for plant and machinery. This includes spending on commercial property through developments, acquisitions, fit-outs, and refurbishments. In addition, qualifying costs related to structures and buildings are available for relief.
Self-employed, partnerships, landlords and tenants are able to claim Capital allowances.
Super deduction and full expensing are two schemes within capital allowances. Super deduction allows businesses to deduct 130% of the costs of certain assets from their profits, rather than the standard 100%. The super deduction period ended in April 2023, meaning that any business that has incurred expenditure within this period should seek the expertise of a capital allowance specialist.
Following the super deduction scheme was replaced by full expensing from April 2023 onwards. Full expensing allows businesses to deduct 100% of the cost of qualifying capital expenditure within the same year, further incentivises investments in capital assets. In the Autumn Statement of 2023, the government announced that full expensing would be made permanent, which is great news for businesses looking to invest in capital assets going forward.
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Tax relief on qualifying plant and machinery expenditure is provided at 18% (main rate pool) or 6% (special rate pool), on a writing down basis, depending on the item. Tax relief available on qualifying SBA expenditure is provided on a 3% straight line basis.
A scoping call takes place between the client and a consultant, to discuss the project opportunity.
To confirm the businesses entitlement to claim capital allowances. This is determined by reviewing the relevant legal documentation, including land agreements and construction schedules to confirm that the entity incurring the expenditure satisfies the entitlement criteria for capital allowances purposes.
Review relevant specifications, cost information and floor plans and liaise with relevant consultants and design team members to clarify contract and variation costs, construction details and obtain further cost information. Also providing advice on tax efficiency of design.
Carry out a detailed analysis of all information gathered to categorise individual items according to the most favourable tax treatment where we are satisfied that there is a filing position for that treatment.
Undertake a detailed capital allowances survey of each project as the works progress, including taking written and photographic records that will assist us with any negotiations with HMRC for the tax treatment adopted for particular items.
Compile and issue full and detailed capital allowances reports including detailed back up for substantiation of the plant and machinery, and which reconciles to the total additions in the statutory accounts. Provisional claims to be submitted if so required.
*This process is flexible and can be adapted based on a client's preferences as to their involvement within the process.
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For development projects
For acqusitions
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