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Use or lose your Capital Allowances

28th November 2014

When acquiring a commercial property there is the potential for substantial tax relief through unclaimed capital allowances on the second hand fixtures included with the property. Despite this potential it is an area that is often neglected, and many UK businesses have unclaimed capital allowances within their commercial buildings.

Requirements

For the purchaser to be able to claim capital allowances on the fixtures purchased with a property two requirements must be met.

The first requirement is the ‘fixed value requirement’. Within two years of the transfer the seller and purchaser must either formally agree a value for the fixtures being purchased within the property, or at least be commencing proceedings to agree the value. Ideally this needs to be done as part of the price negotiation proceedings, as the purchaser needs to consider the capital allowances they may be able to claim when agreeing on a purchase price for the property.

The second requirement that must be met (for transfers after April 2014) is the ‘pooling requirement’. The seller must pool the relevant expenditure to a capital allowance pool prior to sale. If the seller does not pool the expenditure before the sale of the property, the purchaser will be unable to make a capital allowance claim on the qualifying fixtures.

Only if both if these requirements are met can a purchaser claim the unclaimed capital allowances on the fixtures in the purchased property.

Items Qualifying for Capital Allowance Claims

If the above requirements are met the purchaser next needs to identify the qualifying fixtures on which the capital allowances can be claimed.

Just a few examples of such fixtures include sockets and switches, carpet tiles, kitchen and toilet fittings, IT equipment, and security alarms and gates.

Allowances can also be claimed on ‘integral features’ which broadly includes electrical systems (such as lighting), cold water systems, space or water heating systems, lifts and external solar shading.

Properties where capital allowances have the greatest potential value include offices, hotels, nursing and residential homes, pubs and hospitals.

The Howard Worth Survey

At Howard Worth we provide your business with a team of qualified tax specialists, and with our partnership with an independent firm of RICS qualified Quantity Surveyors, we can identify unclaimed capital allowances in your commercial buildings, in most cases securing a tax refund.

The survey itself contains three stages:-

  • A survey of the commercial building(s)
  • Valuation of the qualifying items of plant and machinery/integral features
  • The compilation of a comprehensive report for HMRC

There is no financial risk to the business as the charges for the survey and claim are calculated as 7% of the additional capital allowance identified.

Recent Successful Client Claims

One of our recent surveys on a building acquired in 2013 resulted in 35% of the purchase price of the property being identified as qualifying for a capital allowances claim, which in monetary terms was £71,356.

Another successful claim was made for an office and distribution warehouse which were purchased by a logistics company client in 2010. The resulting claim for tax relief amounted to 27% of the purchase price of the property, equating to £68,568.

We also carried out a survey for a manufacturing facility which was purchased in 2009 and we were able to identify 40% of the purchase price of the property which will be used to reduce future taxable profits.

 

David Evans is an Associate Partner at Howard Worth Chartered Accountants. For a more detailed insight into how we could claim a capital allowance tax refund on behalf of your business please call David Evans on 01606 369 000 or email at davidevans@howardworth.co.uk.

 

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