Capital allowances – how we can maximise your reliefs

January 5, 2022

Amid the economic struggles suffered by many businesses during the pandemic, the potential for tax savings or, in some instances a tax repayment, could be a welcome opportunity. However, as a complex area of taxation, it is vital to seek the right advice at the right time. Here, Matt Bell, partner at regional property consultancy firm George F. White, explains how best to ensure you are in the strongest position going forward.

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What are capital allowances?

Capital allowances are a form of tax incentive to encourage businesses to invest in plant and machinery. Under UK accounting standards and tax legislation, deductions for any expenditure which are capital in nature are not permissible. The distinction between capital and revenue is a dark art in itself. Most repairs or replacements and general day-today expenditure are treated as revenue, whereas any improvement, or new purchase that would provide an ‘enduring benefit’ to the business, would be deemed to be capital. Capital allowances were first introduced in 1946 to support investment and development in Britain following the war. The intention remains just that, to support growth and although they have been around for more than 75 years, they are still commonly misunderstood and overlooked. However, the savings for those who invest in the analysis and expertise to prepare a detailed claim can be significant.

Forms of capital allowances

Following the 2021 Budget, two new and temporary incentives were introduced, including the super deduction, providing relief equivalent to 130 per cent of qualifying expenditure, and the 50 per cent first year allowances for special rate, providing half of the cost of the asset as immediate tax relief rather than being spread over the life of the asset. These new offerings are intended to be used alongside the existing increase to the annual investment allowance to £1 million, writing down allowances, and structures and buildings allowances to strengthen the investment in the UK.

How can we help you?

We have a team of experienced Chartered surveyors, who provide advice on all aspects of capital allowances and who have had great success in identifying allowances that have resulted in tax savings of more than £6 million in the past six months. Our team includes Chartered surveyors and ex-HMRC policy specialists, who have extensive experience in this field. We advise on current and historic projects, as there is no deadline for claiming allowances, but the sooner the claim is made, the sooner the benefit to the recipient. We advise on property purchases, identifying ‘embedded allowances’ using approved HMRC and valuation office methodologies, and this is where our specialist surveyors’ skills really come into their own, going above and beyond where many advisors can possibly go, carrying out detailed valuations to ensure all expenditure is fully captured. We also advise on property refurbishments and fit-out works, whether from a landlord or tenant perspective, to ensure allowances are maximised from the start and any capital contribution is treated correctly

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