Capital Allowances remain poorly understood and underused — which is surprising, when you consider that they have been available in one form or another for 100 years.
Yet in our experience, the subject of Capital Allowances is often neglected, with many companies still not receiving timely, accurate or comprehensive advice.
Many clients that you’ll deal with will be investing in embedded plant and machinery within their commercial building. And there are big financial incentives for claiming — the average client benefit at Catax for Capital Allowances is around £67,000.
So why do Capital Allowances remain so under-utilised and what can be done to improve this?
They Are Complex
Capital Allowances have been reformed numerous times, yet it is still a complex area and, at times, confusing.
With different types of allowance relating to a wide range of items and accounting periods, it can be all too easy to underestimate what is eligible.
Timings Need to Be Right
Due to legislative changes over the past decade or so, Capital Allowances are a time-sensitive matter as well as being a specialist area.
Therefore, it is important that a client receives advice at the right time. We have seen numerous examples where clients have missed out on tens of thousands of pounds in tax relief by not getting that timely, accurate advice.
For example, if a client has spent a significant sum of money either building or refurbishing a property in the last 12 months they should look into Capital Allowances as a matter of urgency.
Business Priorities Change
We regularly spot new trends in Capital Allowances, as different sectors begin to invest more heavily in their commercial premises. It makes it crucial to keep communicating with clients, as a company that has made no efforts to invest in commercial property could suddenly be looking to scale-up their property portfolio or refurbish their premises.
Last year, we saw an increase in Capital Allowances claims on furnished holiday lets as the market became extremely buoyant due to the staycation boom following the pandemic.
We have also seen a big uplift in Capital Allowance enquiries into mixed-use buildings where developers are creating hive hubs and villages where buildings accommodate office space, commercial, gyms, cafes and even living accommodation. Although the residential elements of these buildings cannot qualify, the communal areas such as gyms, receptions and gymnasiums can, given that they are considered to be “commercial.”
Capital Allowances are also particularly prevalent in the care industry, as care home owners can claim for embedded items of plant and machinery, not only at refurbishment stage but also the acquisition stage of an existing property.
How We Can Help
As specialists in Capital Allowances, we can maximise claims to their fullest potential.
A Capital Allowances claim is essentially an apportionment exercise where the level and the value of qualifying plant and machinery within a building is considered for tax relief.
The reason we can maximise claims is because we have time for in-depth analysis. Our team will work with the client throughout the process by carrying out due diligence, a survey, and then producing a final report which goes to their accountant and HMRC. When required, we can move very quickly in order to submit a claim before a client’s tax year-end.
We can also advise clients from the moment they consider purchasing commercial property to ensure they are getting timely advice on Capital Allowances from the outset.