Capital Allowances

Capital Allowances – Claim it or Lose it

From the 1st of April 2014 capital allowances could be claimed on commercial property by any tax payer upon acquisition.

When buying a commercial property, typically there would be fixtures and fittings in the property such as items which are part of the plumbing and electrical installations. It may be an industrial property that has machinery, or a hotel that may be sold with all the furniture and kitchen facilities. These items are likely to be needing replacement at some point and as such would qualify for capital allowances.

This form of tax relief unfortunately is not available on residential properties, but is available on commercial properties such as: factories, shops, hotels, industrial warehouses, showrooms or other business premises. It can also be claimed on development and construction projects.

It can also only be claimed when buying or selling and if not claimed at the right time could be lost forever.

Changes in the capital allowances rules from 1 April 2014 could lead to commercial property owners, whether buying or selling, losing any unclaimed relief for capital allowances forever, for themselves and any subsequent purchaser of the property.

It is therefore vital that when considering an acquisition of commercial property full history of the capital allowances claimed on it is obtained as part of the due diligence. Capital allowances can not be claimed at a later date. It must therefore be agreed between the parties, helping buyers claim the maximum relief and sellers extract the optimal price.

If you are a non-taxpayer, such as a charity or a pension fund purchasing a commercial property, the capital allowances relief may not be available. However, it is important that steps are taken to preserve the position for future buyers as it will increase the value of the property.

When purchasing a commercial lease at a premium the right ordinarily will remain with the landlord unless otherwise negotiated. However, the purchaser of the lease would be able to claim relief for improvements which they made to the property, which involved fitting or fixtures.

Whether you are buying, selling, or leasing a commercial property, it is vital that you get professional advise at an early stage. Joe Harp will be happy to assist with any inquiries at: