Tools, machinery, office or kitchen equipment, computers, vehicles, pieces of plant, and factory equipment may all qualify for Capital Allowances. Any competent accountant should identify these, but manufacturers who own their premises can also claim for certain fixtures and integral building features. These could include electrical wiring, cold water systems, heating, air conditioning systems, and lifts.
Claiming Capital Allowances on fixtures and building features necessitates a level of specialist expertise that extends beyond what a general practitioner might be expected to possess. Consequently, less obvious items are often left unclaimed. As a result, many manufacturers are only claiming the tip of the iceberg, while the majority of the value remains hidden from them. This means they pay more tax than necessary, i.e., they lose money.
Consider Hawksley and Sons, a company manufacturing laboratory and medical equipment for domestic and international customers. While the firm had claimed Capital Allowances on machinery used for business purposes, its directors had never considered fixtures and features within the building. They purchased their premises back in 2006 for approximately £300k.
Hawksley and Sons appointed Capital Allowances specialist STax, which reviewed the building’s history and then conducted a capital allowance survey to calculate an apportionment of the expenditure. They discovered £100k of unclaimed allowances within the fabric of the building for Hawksley & Sons. These included fixtures and fittings such as a disabled lift, compressed air systems, and specialised utility infrastructure to support the firm’s industry-specific plant & machinery.
Capital Allowances can significantly reduce a manufacturer’s tax bill or, in some cases, provide a cash rebate for previous years. 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 THE URGENCY?
The Finance Bill 2012, coming into effect in April 2014, has altered the way Capital Allowances operate at the point of sale. The central reform is the introduction of mandatory pooling of Capital Allowances. From April 2014, all commercial properties must be fully assessed, and Capital Allowances pooled, recorded, and transferred to the new owner.
If this process is not properly executed, the opportunity to claim simply vanishes. Businesses wishing to unlock tax relief need to act now or risk losing this major tax benefit.