Betteridge and Milsom

Capital Allowances Background

When a property owner / occupier incurs expenditure on this acquisition, development, fit-out or refurbishment of a property a proportion of the expenditure incurred is likely to be eligible for capital allowances.  In some cases the expenditure eligible for capital allowances can be significant, as high as 75% of the capital expenditure incurred for some fit-out and refurbishment projects.

Identifying the assets eligible for capital allowances, and the rate at which the capital allowances can be claimed for specific assets, is not straightforward and often outside the remit of many accountants and general tax practitioners.

Rate of capital allowances

Plant and machinery allowances can be claimed at different rates depending on the asset involved.  The three categories of plant and machinery allowances are:

Other tax reliefs may also be relevant for expenditure incurred in respect of capital projects, including industrial / hotel building allowances (until April 2011), revenue deductions for repairs, Enterprise Zone Allowances, contaminated / derelict land relief etc.

How Betteridge & Milsom can help maximise claims for capital allowances

Betteridge & Milsom prepare claims for capital allowances to help maximise claims for tax relief in relation to capital projects. Our services include:

• Reviewing the entitlement to claim capital allowances to ensure legal entitlement for capital allowances in respect of the expenditure incurred.
• Liaising with other members of the professional team, e.g. building services engineer and architect, to collate information to both prepare and support the claim for capital allowances.
• Preparing detailed claim for capital allowances to ensure the client fully maximises its claim for tax relief in relation to the capital project.
• Following completion and submission of the claim for capital allowances, we will provide support and assistance with any enquiries received from HM Revenue & Customs in relation to the claim for capital allowances.

For many capital projects, capital allowances are not considered until completion of the project which can sometimes result in missing supporting information and reduced claims for tax relief.  Involvement of specialists from the outset can result in significantly higher levels of expenditure being identified as eligible for tax relief.  We can also provide assistance in the planning stages of a capital project to help ensure the design is as tax efficient as possible.  This may include:

• Reviewing the initial project design to identify where changes to the design can be made to make the project more tax efficient.
• Reviewing the project specifications to ensure, where relevant, qualifying energy efficient assets eligible for Enhanced Capital Allowances are incorporated into the design.
• Providing advice in relation to the capital allowances impact of any landlord contributions.