What are Capital Allowances?
A form of tax relief
Simply put, capital allowances are a form of tax relief provided by the government to businesses. Allowing companies to deduct certain capital expenditures from their taxable profits. This expenditure typically includes buying, renovating, or improving commercial properties, machinery, and equipment. O which is used for business purposes.
Two Main Categories
Plant and Machinery & Structures and Buildings Allowance
CA’s relating to property are primarily categorised into two main types: plant and machinery allowances, and Structures and Buildings Allowances (SBA). Plant and machinery allowances cover a wide range of assets essential for business operations. This includes equipment, machinery, and fixtures.
On the other hand, SBAs incentivise investing in new non-residential structures and buildings. This allowance allows businesses to claim a flat rate tax relief on eligible construction costs over a specified period (currently 33 and one-third years). This provides a boost to the commercial property sector and supports infrastructure development.
Exploring PEFFs
Tax savings waiting to be uncovered
Now, you might wonder, what’s the big deal about capital allowances? In particular, why should property investors pay attention? Well, here’s the catch: embedded within commercial properties are potential tax savings waiting to be uncovered.
This is where our expertise comes into play… property-embedded capital allowances or PEFFs for short.
Various assets qualify for capital allowances when a commercial property is purchased, built or renovated. These assets could range from heating systems and lighting to lifts and security installations. If an accountant hasn’t been provided with detailed invoices for certain items, accounting routines could overlook PEFFs. Resulting in what could be thousands of pounds in tax relief being lost.
The Benefits
Uncover the reasons why you should claim
So, what do capital allowances achieve, especially in the context of property investment? Firstly, they can significantly reduce income and corporation tax liabilities against rent or trade profits. In turn, this boosts cash flow and enhances profitability. By identifying and claiming this type of tax relief on eligible assets within a property, investors can effectively lower their taxable income. Therefore leading to substantial savings.
Capital allowances can also encourage investment and innovation, leading to business growth, job creation, and economic prosperity through government tax incentives.
Specialised Expertise
Knowledgable advisors are key
Capital allowances are a powerful tool for property investors to optimise their tax position and help to grow their business. However, navigating the complexities of this tax relief requires specialised knowledge and expertise. Particularly in identifying and quantifying embedded capital allowances within commercial properties.
As specialists in property-embedded capital allowances, our team provides a thorough process. This can include a site survey to identify these overlooked items and help investors unlock the full potential of their property investments. By accessing our expertise, investors can harness the benefits of this tax relief with the confidence that no stone has been left unturned. As well as the fact that the claim has been completed in line with HMRC guidelines.
If you would like support with making a claim, please get in touch...
Latest News
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15 November 2024Specialist CA Tax Advice for Accountants
At CARS, we’ve been providing expert support and advice for accountants for years. We understand that in the fast-paced world of accounting, keeping up with every aspect of tax legislation can be a daunting task. For accountants, Capital Allowance (CA) tax relief is an area that holds significant... -
8 November 2024Understanding Research and Development Allowances (RDAs) on Capital Expenditure
Innovation is a beacon of progress, driving companies toward success and relevance. The pivotal role of Research and Development (R&D) in fostering innovation is recognised and, as a result, incentives are offered to businesses through mechanisms like Research and Development Allowances (RDAs). Understand...
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Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.