Capital Allowances

Capital Allowances is slowly becoming one of the few legitimate tax reliefs left available to the property investor.

The Plant & Machinery within your property assets can be used against any income you have to make you richer by reducing your tax bill.

Capital allowances are the sums of money a UK business can deduct from the overall corporate or income tax on its profits. These sums derive from certain purchases or investments, outlined in the Capital Allowances Act 2001. A capital allowance is given instead of depreciation for certain types of asset.

Our Capital Allowances expert confidently offers a no claim, no fee; No separate surveying costs; and these allowances can be claimed on your property, and can be used against ANY income stream. Claiming does not affect your CGT position and he works with your existing accountant to make it a seamless process. 


The utilisation of this 135 year old tax relief, is a form of tax depreciation which property owners, both personal and corporate can claim on their tax return (Box 32+34 on the property pages – SA105), but rarely do due to perceived complexities and lack of understanding from general accounting providers.

Anyone who owns qualifying commercial property can claim this after a specialist valuation survey. Properties such as, shops, blocks of flats, offices, hotels, restaurants, care homes, public houses, factories, industrial units or warehouses can be claimed on.

You can claim when buying or developing existing freehold properties, constructing new properties or developing leasehold properties.

The plant and machinery included in commercial property can include fixtures and fitting as well as moveable items like furniture. More integral fixtures can include carpets, air conditioning, sanitary ware, kitchens, heating, emergency lighting, wiring to fixed plant, fire equipment, security systems and telecommunications. The list is lengthy and unfortunately there is no definition of what constitutes Plant & Machinery. However, there is a functional test – the asset must be used in the qualifying activity.

If you are a UK tax payer and do not currently pay tax but do have an income source, you may be able to continue to mitigate your future tax liability, property held in a pension fund or owned by a charity will not qualify however.


As a part of Capital Allowances you should also be aware of (the technical bit):-

Enhanced Capital Allowances (ECAs)

ECAs covers expenditure on energy saving plant and machinery that meets the criteria specified on Energy Technology List (ETL) managed by the Carbon Trust on behalf of the Government.  Enhanced tax relief of 100% first year allowance for expenditure (including equipment, transportation and installation) or a credit of 19% for loss making companies is available. 

Business Property Renovation Allowances (BPRA)

BPRA is available on converting or renovating qualifying buildings in designated disadvantaged areas into business premises. The relief is 100% allowances on the qualifying expenditure.

Land Remediation Relief (LRR)

Entitles a company who acquires contaminated or derelict land to enhanced relief for the costs incurred (both capital and revenue) in cleaning up the land. The relief is 150% of the cost or a tax credit of 16% for loss making companies.  Derelict means the land cannot be used until buildings are removed and the contamination must be as a result of industrial activity and includes contamination from for example radon, asbestos, naturally occurring arsenic  or Japanese knotweed.

Government Review need for Capital Allowances!

In 2017 The Chancellor of the Exchequer tasked the OTS (Office for Tax simplification) to review the need for Capital Allowances, and whether we should change to using Accounting depreciation when Simplifying tax relief for tangible fixed assets? Their report was published a couple of weeks ago. Having sought consultation from a number of different stakeholders, the OTS concluded that:- “If we were designing a system to give relief for capital expenditure of this kind from scratch, depreciation could work perfectly well and would make a lot of sense. However, our analysis has shown that the undoubted simplification benefits would not be worth the disruption of the wholesale upheaval involved. As only 30,000 businesses claim capital allowances in amounts exceeding the level of the Annual Investment Allowance, we consider that the focus should be on improving the existing system.” In short, Capital Allowances are here to stay. Contact Arthur to...
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