Capital Allowances Explained: How Businesses Can Claim Tax Relief on Assets
These provide businesses with tax relief for the reduction in value of eligible capital assets used by the business, by allocating the business to write off the cost of the assets over a period of years against the income of the business.
Businesses are able to claim capital allowances on plant and machinery, integral features within a building (such as heating systems, lifts, air conditioning systems, wiring and plumbing) and certain fixtures (bathrooms and kitchens) also qualify as “Plant and Machinery”.
For tax purposes, the business must group items into “pools” of capital expenditure on which they have not previously claimed capital allowances. These pools attract different rates of allowances. Whilst most plant and machinery fall within the main pool of 18% pa, items which have a life of more than 25 years will fall into the special rate pool of 6% pa.
Most items in the main pool will also be eligible for the Annual Investment Allowance of 100% (subject to £1 million a year maximum).
Claiming Capital Allowances When Buying a Commercial Property: What You Must Do
The buyers must identify the capital allowances and record them as part of purchase and sale of the property in question, or they can be lost forever.
In order to be able to claim for integral fixtures and fittings, the purchasers must agree the value of the fixtures with the seller. As an integral part of the negotiations, the parties must enter into an election under Section 198 of the Capital Allowance Act 2001, to agree the value of the eligible assets in question, thereby allowing the purchases to get the benefit of Capital Allowances.
How Splitting the Purchase Price Can Reduce Your Stamp Duty Liability
By splitting the purchase price between the property and the plant: the Stamp Duty liability is reduced.
Structures and Buildings Allowances: Who Can and Cannot Claim
You cannot claim Buildings Allowances if:
-The building has been used as a residence at any time
You can claim Building Allowances if:
-It is a qualifying activity
> Trades, professions and vocations
> Mining, quarrying, fishing
From April 2020 the rate for acquisitions was 3% pa for 33.5 years.
