Unlocking tax savings through capital allowances

Unlocking tax savings through capital allowances

Capital allowances are a valuable form of UK tax relief. Significant cash tax savings can be secured for commercial property expenditure by maximising capital allowances claims.

Claims for historical expenditure are possible and, going forward, enhanced tax relief is available through the new ‘Super’ allowances introduced for companies in March 2021.

Who can claim?

Cash tax savings are available to all companies and individuals, whether they are a UK resident or not. The tax relief identified can be offset against taxable profits if you pay UK corporation tax or UK income tax.

What can businesses claim on?

Capital allowances are available on expenditure incurred on qualifying assets in all types of commercial property. Here are some examples of the typical projects that our specialist capital allowances team get involved in:

• Major new builds, extensions, fit outs and refurbishments
• Commercial property acquisitions
• The purchase and renovation of furnished holiday lets
• Remediation of contaminated land

Commercial properties contain elements that qualify for capital allowances such as heating, electrics, plumbing, sanitaryware, fixtures and fittings. Depending on the type of property and work undertaken, up to 30%-40% of the build cost or purchase price can qualify for relief. With alteration and refurbishment projects, this figure can be up as high as 80%-90% of the total cost.

By accurately identifying expenditure eligible for capital allowances, businesses can effectively reduce the cost of assets and enhance investment returns.

Retrospective claims and deferring relief

It’s important to note that claims can also be processed for historical projects where the following is applicable:

• The business has in the past acquired a commercial property and still owns it.
• The business has in the past incurred significant levels of property expenditure and did not at the time undertake a specialist capital allowances exercise.

Often on major projects a lack of cost information from contractors means valuable allowances are missed. However, capital allowances claims can in fact still be produced where no cost information exists.

Crucially, unclaimed capital allowances can be carried forward in whole or in part. Although, a specialist capital allowances advisor should be contacted to ensure that no enhanced reliefs are missed by doing so.

‘Super capital allowances’

Going forward, enhanced tax relief is available through the new ‘Super capital allowances’, which was introduced in March 2021 and permits 130% or 50% relief for certain qualifying assets, up until 31 March 2023. You can find out more about the ‘Super capital allowances' here.

The regime continues to evolve, and businesses should focus on capital allowances now to ensure tax savings are fully optimised.

Get in touch

The Azets capital allowances team are made up of multi-disciplinary specialists that include chartered surveyors, tax advisors and accountants. This means we understand construction and valuation matters, as well as how to interpret necessary case law and complex tax legislation to maximise and accelerate the relief.

For more information or to discuss how to ‘unlock’ tax savings through capital allowances, please get in touch with our specialist team today.