If you are outfitting commercial properties, capital allowances are a way of gaining tax relief against the value of the capital spent on improving those properties.
Capital allowances apply to all properties within the commercial sector and the tax relief that can be gained comes in the form of a percentage rebate or reduction in the size of your tax bill.
Capital allowances exist as a government incentive for companies to spend their capital and encourage large scale growth within the private sector.
What Are The Financial Benefits?
Typically, the capital allowances available for a Category ‘B’ fit-out project range from 75% to 85% of the expenditure incurred.
Assuming a 17% Corporation Tax Rate, this equates to recovery of between 12%-13.5% of the original capital investment.
Category ‘B’ Office Fitting Out Works; Capital Allowances Min / Max % Range
At Capsure Tax we are a specialist Capital Allowances Advisory Firm with significant experience in the preparation, negotiation and agreement of capital allowances claims for major projects.
Our people are dual qualified tax, surveying specialists with significant experience in this specialist area of taxation.
This enables us to consistently optimise the capital allowance position for each construction project for property transaction where we are retained.
Our client centric approach is based on, clear communication, all- encompassing & regular client engagement, with the Partner involved in all aspects of each instruction.
Capital Allowance on Office Fitting Out Works
Office fitting out works are a major capital commitment for business. They require a high level of capital investment to plan, deliver and complete.
Government tax Incentives in the form of capital allowances are available to encourage businesses to undertake this capital investment. These incentives are obtained through savings in Corporation and Income Tax.
The main allowances which are available in relation to office fitting out works include Enhanced Capital Allowances (ECAs), Plant and Machinery Allowances (PMAs), Integral Feature Allowances (IFAs) and structure and building allowances (SBAs).
Obtaining the relief is not an automatic process and the tax rules are complex and often misunderstood. As a result, many businesses miss out on the tax relief available to them.
Capsure Tax is a leading Capital Allowances Advisory firm which specialises in securing the available tax incentives in relation to construction projects and has particular expertise in relation to office fitting out works.
The involvement of Capsure Tax’s specialist Capital Allowances Team will ensure that the capital allowances position is optimised, professionally managed and HMRC compliant.
|£10,000,000 Development Cost||+ 31.25%|
|Tax Saving of £3.125m|
Assuming a 12.5% Corporation Tax Rate, €3.125m of tax savings can be recovered for a €25m hotel development for a combined plant and machinery and industrial building allowances claim.
A significant proportion of the allowances (50%) can be accelerated and claimed over 8 years compared with a traditional Hotel Building Allowances claim where the relief is given over 25 years.
Our Partners each has over 25 years experience working on major office development projects. We are one of the leading consultants working in the commercial offices sector, having prepared claims for some of the largest office developments constructed in the UK and Ireland in recent years.
£150M ‘Grade A’ Offices – London
The project comprised a £200m Shell and Core & CAT ‘A’ offices.
£280M ‘European Headquarters’ Offices – London
The project comprised the construction of a £280m Shell and Core Office and associated CAT ‘A’ fitting out works.
How The Process Works
- Tax Compliance Support
We provide the provision of specialist capital allowances input and support to your retained Tax Advisors and/or in-house teams. We work with your tax advisors on specific projects.
- Transaction Support
We provide capital allowances advisory support during the legal due diligence process, particularly in relation to occupational leases, landlord contributions, purchases and disposals.
- Project & Development Support
We complete the preparation of capital allowances claims for property developments, refurbishments and fitting out projects.
- Strategic Consulting
We provide the implementation of capital allowances strategies including the implementation of capital allowances systems and processes for clients with large capital expenditure programs.
- Historic Capital Expenditure Audits
We provide analysis of historic capital expenditure and capital allowances claims including the identification and retrospective recovery of unclaimed tax relief.
- Accelerated Capital Allowances Planning
We assist trading companies to invest in qualifying energy efficient technologies for their business.
- Agreement for Lease Negotiations
Providing capital allowances advisory support during the agreement for lease negotiations e.g. Landlord contributions to fitting out works.
- HMRC Negotiation Support
We undertaking all necessary negotiations to reach a successful conclusion to the submitted capital allowances claims. We take all the stress out of communicating with HMRC.
A Deeper Look At Capital Allowances For Properties
Capital allowances are a significantly valuable type of tax relief if you currently own a furnished holiday let or a commercial property. The length of time that you’ve owned the property doesn’t matter and it doesn’t even matter if you actually built it; you will still be able to claim.
You will typically get a large rebate as well as a reduction on your taxes on an ongoing basis once it is a property in the commercial sector.
The property can be owned either by your limited company or even privately. The time the building was purchased doesn’t matter all of the time and you will be able to find allowances to be used against your profits. These are the reasons why this is such as valuable type of relief.
This particular allowance can be claimed by anyone who has incurred capital expenditure through the process of purchasing or even building holiday lets or commercial properties. You will be able to claim these on particular purchases or investments and a part of your costs will be removed from your profits so that your tax bill is lowered.
This was once overlooked, however, it is actually a very critical tax relief. Despite this, many commercial property owners in the United Kingdom are not aware of it, which results in less than 10% of them making these claims. 90% of property owners have huge amounts of cash that are just there in the HMRC that are waiting to be claimed.
There have been some changes to retrospective claims in the last couple of years so you should get professional advice as soon as you can before you buy or sell any properties.
Capital Allowances Know-How
We have actually submitted high volumes of claims over the last few years which have result in huge tax savings for our customers (in the tens of millions of pounds). We make sure to significantly reduce your costs when it comes to getting your claims ready.
This is done by not using specialist surveyors where to avoid additional fees. Our calculations are based on the capital allowances legislation and apportionment provisions in this legislation.
Capital Allowances Tax Legislation
When it comes to how available capital allowances are, it is quite complex with regards to tax legislation. There are a few main principles that determine how particular aspects of expenditure are dealt with according to case law.
There may be issues finding eligible expenditure which is even made difficult by building documentation that may be unclear or even unavailable. This makes it much more challenging to create a claim and get the full amount of tax relief.
It is necessary to have certain specialised knowledge in order to understand and obtain the correct documentation and information as well as to identify all of the eligible assets.
When it comes to the most common issues, there is usually failure on the part of businesses that don’t state certain machines and plants that are inside of their commercial buildings.
It is important to note that these assets also include the HVAC system, security system, emergency electrical systems, sanitary equipment and more. Usually, the cost of these assets are not separated from the cost of the property and are known a freehold additions.
One common misunderstanding is that capital allowances have to be claimed if there is a cost. This is not true. You can claim allowances that go back many years, usually when the commercial property was purchased. You can even claim on items that did not qualify in the past but do qualify now.
In closing, there is no specific time period or end point for this exercise. Once the items are still being used commercially, you can possibly get tax relief on them from as far back as the date when you purchased the property.
Contact us today to find out how we can help you: