Capital Allowances Demystified

In these austere times with businesses under constant pressure to reduce costs and run as efficiently as possible to turn a profit. So it will dismay CEOs to learn that they may unknowingly be sitting on a substantial tax windfall in unclaimed Capital Allowances, potentially worth hundreds of thousands of pounds.

Capital Allowances are a form of tax relief on items (or assets) bought for use within a business. They allow commercial property owners and many leaseholders to offset the costs of assets against the business’s taxable profit.

Tools, machinery, office or kitchen equipment, computers, vehicles, pieces of plant, and factory equipment may all qualify for plant and machinery Capital Allowances. Any accountant worth their salt should identify these, so chances are your business is already claiming for these items.

However, certain fixtures and integral building features, such as electrical wiring, cold water systems, heating and air conditioning systems, and lifts may also qualify. Claiming requires a level of specialist expertise beyond what a general practitioner could be expected to possess, meaning these are often overlooked or inaccurately assessed and processed.

Allowances are available on items of plant and machinery, some office equipment, fixtures, fittings and integral features. Capital Allowances are often inaccurately assessed and processed by accountants, meaning that the majority of businesses are missing out on significant tax benefits.

STax – The Capital Allowance Experts are certain that many businesses could unknowingly be sitting on a substantial tax windfall, perhaps worth hundreds of thousands of pounds.

WHAT ARE CAPITAL ALLOWANCES?

Capital Allowances are a form of tax relief available to commercial property owners and many leaseholders on items bought for use within the business. They apply to expenditure on things such as plant and machinery, some office equipment, fixtures, fittings and integral features. Capital Allowances are often inaccurately assessed and processed by accountants, meaning that the majority of businesses are missing out on significant tax benefits.

WHAT ARE THE BENEFITS OF CLAIMING CAPITAL ALLOWANCES?

Accurately assessing qualifying items and processing an effective claim will, in many cases, form the basis of a substantial write-off against your business’s profits, resulting in a lower tax charge or in some cases a cash rebate for previous years. It is estimated that 96% of businesses are under claiming their rightful capital allowance tax relief – to the tune of tens of billions of pounds. Individual claims can sometimes amount to as much as 35% of the value of a freehold i.e. £350K of tax relief for a building bought for £1m.

WHY ARE SO MANY BUSINESSES MISSING OUT ON TAX RELIEF?

The rules governing which items are eligible to be pooled for this form of tax relief are complex and vary significantly from building to building and across different industries. It is crucial to take professional advice from a Capital Allowances expert to ensure every eligible item is included in the pool. Typically, businesses can claim on items that are used in the running of a business, such as heating, security, general power, fire alarms and even carpet! Whereas a good accountant should identify assets such as computers and phone systems, many fail to include less obvious items, especially integral features or ‘within the wall’ items. Consequently, most property owners are only claiming the tip of the iceberg while most of the value remains hidden from them.

WHY DO I NEED TO CLAIM NOW?

Capital Allowances rules state that only one owner is able to take full advantage of the available tax relief during the lifetime of the building. Legislative changes enforced by the 2012 Finance Bill altered the way Capital Allowances are dealt with and in many situations, a deadline of April 2021 has been set for any unclaimed Capital Allowances. Businesses wishing to unlock tax relief need to act now or risk losing this major tax benefit.

GET IN TOUCH WITH US AND WE WILL CARRY OUT A FREE DESKTOP REVIEW

Contact STax on 0207 147 9940 or alternatively use our: Capital Allowance Calculator to see give you an indication of whether you can make a Capital Allowance Claim.

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