What Are Capital Allowances on UK Property?

Both companies and individuals buying, improving or leasing commercial property may be eligible for capital allowances on the aforementioned assets; indeed it is almost impossible that an operational commercial property would not have some claims to make.

To be eligible these must be durable assets (with an expected life of more than two years - or else they qualify as consumables) which are not part of the premises themselves, that is to say they are the tools used to conduct the business rather than the structure housing it. It is important to note that these must actually be used in the business. For instance, if you were to buy a factory with existing refrigeration plant but the business you conducted within the building had no need for it; you would not be able to make a claim against it.

Nevertheless there are many things that are eligible for the allowance, these include...

• Vehicles
• Large tools
• Machinery
• Furnishings
• Furniture
• Electrical goods
• Computing and telecommunications equipment
• Safety and security equipment
• Bathroom equipment (baths/sinks etc.)
• Software with a working life of more than two years
• Swimming pools
• Storage equipment

There is a second category which includes:

• Inefficient cars (160g/km or more CO2 emissions)
• Power supply systems
• Water supply systems
• Lifts, escalators and people movers

With the exception of the cars the things falling into this second category are known as integral features. The difference between these categories shall be explained shortly...

The way that capital allowances work is that once the value of the assets has been quantified then they may be claimed back at the writing down allowance of 20% (falling to 18% from tax year starting April 2012). What this means is 20% of the remaining allowance can be claimed every year. So an allowance of £20,000 would allow you (at the 20% rate) to claim £4,000 the first year, £3,200 (which is 20% of the remaining 16,000) the second year and so on. The aforementioned second category (integral goods and cars) is slightly different in that it qualifies for a lower writing down allowance of 10%(falling to 8% from tax year starting April 2012). The effect of this is that it takes longer to claim the whole allowance.

So to sum up, capital allowances are an easy yet surprisingly little known way to reclaim your money from HMRC. If you think you have some relevant claims then a capital allowance consultancy such as Property Capital Allowances could despatch a qualified surveyor to identify and quantify claims. Then, after contacting your accountant, you would reclaim your money from the treasury.