An article detailing what capital allowances are, how you could be liable to claim them and how to claim them.
What are Capital Allowances?
Capital allowances, as you may already know, are a form of tax relief available for commercial properties when purchasing assets for your business. These assets are what’s known as ‘plant and machinery’ and aren’t used to classify land, buildings or structures, but rather the fixtures and systems INSIDE them (A central heating system, for example). You can only claim capital allowances in a residential property if it qualifies as a furnished holiday lettings business. This means that the property must be available for holiday letting for 210 days / available for 105 days or more.
A fixture is defined as ‘plant and machinery that is installed or otherwise fixed to a building or other description of land as to become, in law, part of that building or other land.’ To put it simply, anything installed into a property that performs a function is classified as a fixture, such as:
Electric & Lighting
Heating & Ventilation
Fire & Security Alarms
The following items don’t classify as plant and machinery, meaning you cannot claim capital allowances on them.
Things you lease (You have to own the item yourself)
Buildings or parts of the building. This includes doors, gates, shutters, windows, water and gas systems.
Physical land and structures. This includes bridges, roads, docks, etc.
Items only used for business entertainment purposes. For example, a karaoke machine, yacht or sound system.
A ‘secret’ and often overlooked factor of capital allowances is that not many people realise you can claim capital allowances on pre-existing fixtures in a building that was there before you may have even purchased or acquired it. These fixtures can result in up to around 25% of the overall purchase price of a property, meaning you can earn 10’s of 1000’s of pounds just from making the claim.
Let me repeat, you can make 10’s of 1000’s of pounds just from claiming your properties pre-existing fixtures.
Claims on your properties fixtures can be made long after you’ve purchased it, if the property was previously residential and even if the original fixtures have since been repaired or replaced altogether.
How come I haven’t heard of this before?
If you haven’t heard about this before, don’t worry! 80% of commercial properties have unclaimed capital allowances. But why, you ask?
The reason you may not have heard about this before is due to capital allowances being a relatively small and specialist tax sector that has primarily focused on larger properties in the past, with a history of it being an expensive service, meaning people have often ignored or dismissed it.
Couldn’t my accountant make a claim?
If your property is brand new, built from the ground up and you have all the receipts, then theoretically your accountant could, yes. However, making claims on pre-existing fixtures requires specialists to come and evaluate how much they would be worth.
How do I make a claim?
You may be thinking to yourself, how do I claim all this money I’m sitting on? That’s where specialist companies can come in.
HJR Tax is a Newport based company which specialises in property tax and surveillance within the hospitality sector, and more recently, the self-catering industry. HJR handles the surveillance of the property to properly evaluate how much you could be owed, as well as a “no win no fee” service, meaning no upfront costs or fixed fees associated.