Capital allowances

Capital allowances is a means of providing tax relief to businesses.  The aim is to encourage businesses to invest in the UK.

Following the Finance Act 2012, anyone who owns or provides advice on commercial properties should consider to seeking legal and tax advice, particularly if the property is in the process of or is likely to be sold in the near future.  The reason for this is that valuable tax benefits may be lost if a property is likely to change hands and the tax treatment is not dealt with correctly.

The implications in terms of lost tax relief can be significant and may run to hundreds of thousands of pounds for sizeable properties. In summary, capital allowances can be applied to any item that does not form part of the structure of the building and can include anything from the mundane wiring, plumbing, alarms, heating and lighting to lifts, demountable walls and carpets.

Recent regulatory changes to the ‘new fixtures’ rules mean that any seller or purchaser should act now, as under the new rules you are obliged to deal with capital allowances during a property transaction.  Also, the ‘fixed value’ requirement (or the disposal value statement requirement) and what is termed a ‘pooling’ requirement both must be satisfied; your solicitor or tax adviser can help explain the implications of these two changes.

Currently, we are in a transitional period within the legislation.  Property that is purchased between April 2012 (1st April for corporation tax and 6th April for income tax) and April 2014 is not subject to all of the new provisions unless subsequently resold within the period, whilst all property sold after this is included.