Capital Allowance - Technical Considerations

Technical Considerations

Capital allowance reliefs can be set against the client’s taxable profits reducing the amount payable. Companies pay Corporation Tax at 20% or 26% (2011-12 figure), whilst individuals pay tax at 20%, 40% or 50%. Please note as it is an allowance against taxable profit, you have to be a tax payer to benefit, therefore this does not normally apply to property owned in SIPPS or by charities and trusts. Allowances are generated when a business client builds or acquires commercial property. The amount of plant contained within the building or acquired property is the key to maximising the relief.

The claim should be considered as an effective discount and cash contribution to the construction cost or purchase price. The claim provides a tax saving that accrues over time. It is possible to claim allowances on investment properties but plant let in a “dwelling house” is excluded. Blocks of flats, halls of residence etc. will therefore qualify.

For property that is being acquired, the specialist can apportion the purchase price under a recognised HMRC formula, and this is where the inherent property skill can maximise the claim with optimal costing of the plant contained within the property