FAQs

If you have a question that has not been answered below, please feel free to contact us directly

Q1 - I've bought a building that is 30 years old. The plant & machinery can't be worth much now?
Not necessarily so! The value of P&M in a purchased property is determined primarily not by the original cost but whether or not someone has already claimed P&M. So a building costing £100K 30 years ago with £25K of the cost qualifying for P&M allowances and which is now worth £1M could (in simple terms) have a P&M value of £250K if no-one has ever claimed those allowances i.e. a ten fold increase in line with the building value.
Back to top
Q2 - Capital Allowances - that's tax! Surely my accountant deals with that?
Accountants are excellent at understanding and applying the rules relating to capital allowances on general business assets such as cars and computers. However, because capital allowances relating to property assets is such a complex area of tax legislation in terms of both the valuation of the allowances and the property issues that need to be addressed, accountants do not usually have the combined tax, property and valuation skills required to maximise all allowances in this one specific area. It is for this reason that many accountants advise their clients to engage the services of a specialist capital allowances consultant when it comes to maximising capital allowances on property.
Back to top
Q3 - Are any tax incentives available for measures taken to increase energy efficiency?
Enhanced capital allowances are available as a first-year allowance of 100% for expenditure incurred on energy efficient technologies and water saving measures. Claiming such allowances can be quite tricky due to the level of supporting information required by HMRC. Please contact us for more information on how to maximise this relief. Click here for more details.
Back to top
Q4 - I bought a property as an investment five years ago. Have I missed my chance to claim?
No! Whilst it may not always be possible to claim capital allowances in the year expenditure is incurred, you can roll the claim forward and claim the relief in the current tax year (or even earlier!). We have generated both tax savings and tax rebates by looking back at an investor's historic portfolios and claimed previously unclaimed allowances (Retrospective portfolio review).
Back to top
Q5 - I am buying the share capital in a company that owns the property, not the actual property asset. Are there any capital allowances implications relating to this type of structure?
Maybe! Such structures have been put in place over recent years to mitigate the effects of Stamp Duty Land Tax (SDLT). Many of these structures are no longer used for these purposes. However, the investor should be aware that the availability of capital allowances may also be significantly curtailed.
Back to top
Q6 - I am refurbishing a building. Are there any particular tax incentives that I should be aware of?
Quite a few actually! For a start there may be elements of the construction expenditure that qualify for 'Land Remediation Tax Relief' at the rate of 150% and can include items such as asbestos removal. Also some of the expenditure may qualify for a revenue deduction as a repair if so identified. We have already mentioned Enhanced Capital Allowances. Allowances may be available for certain demolition works and also alterations to the building structure for the purposes of installing plant and machinery. These allowances combined with first-year allowances of between 40% and 50% for small or medium sized businesses can make a refurbished property an excellent and tax efficient choice. Click here for more details.
Back to top
Q7 - What is an industrial building?
Good question. This has little to do with what the building looks like. It relates to what a building is used for. Generally buildings used for manufacturing purposes will qualify but other buildings may also qualify e.g. buildings used for certain types of storage subject to the application of recent case law by HMRC. It should be noted that 'late life' industrial buildings can represent very tax efficient investments. However, Industrial Buildings Allowances will be phased out by 2011. Contact us to find out what can be done to mitigate your company's tax liabilities.
Back to top
Q8 - What is the point of claiming capital allowances. Surely doing so will increase my CGT liability when I dispose of an asset?
A widespread misconception. The only time capital allowances relating to property fixtures are taken into account in the CGT calculation is when the asset is disposed of at a loss. Click here for more details
Back to top
Q9 - If I claim capital allowances on plant & machinery fixtures is there anything I need to be aware of if I sell the property?
Loads! You first of all want to protect yourself against claw back of allowances you have already had. You may even want to retain all allowances going forward. Either way your intentions should be clearly stated in Heads of Terms Pre Contract Enquiries and in the Sale & Purchase contract. Capital Allowances always have a value to someone and should at least be factored in to sale negotiations (even if you have not claimed).
Back to top
Q10 - I am buying a commercial property abroad. Are capital allowances available in overseas tax jurisdictions?
Sometimes! Particularly if the country you are buying in has its tax regime based on the UK system e.g. South Africa. In Europe (generally) a system of tax depreciation is operated. However it can still be very tax advantageous to extract costs qualifying for higher rates of tax depreciation. Click here for more details.
Back to top
Q11 - I am a property developer and I can't claim capital allowances because I held property as trading stock. Are there any other ways in which I can use the value of allowances?
Many investors are highly tax driven. Capitus have put in place many innovative structures where the value of capital allowances is maximised and shared between various parties in a transaction. Contact us for details.
Back to top