Capital allowances

Maximise tax relief and improve cash flow with our specialist capital allowances advice.

What are capital allowances?

Capital allowances are a valuable tax relief for businesses to encourage business growth and investment by allowing the cost of plant and machinery qualifying for capital allowances to be offset against operating profits, reducing the tax liability.

They can be claimed when a taxpayer purchases plant and machinery, not just for manufacturing processes, but also for:

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Construction

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Refurbishment

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Fit-out of a commercial property

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The acquisition of property used in its trade or investment business

Expenditure on commercial property is one of the most important areas in which capital allowances need to be carefully considered. The range of qualifying spend can vary from approximately 40% of expenditure on new office developments, increasing to 80% for office refurbishments and 95% for retail and leisure fit-out projects.

Also, when developing on historic industrial land or demolishing or refurbishing old structures or buildings, a 150% first-year allowance may be claimed on expenditure qualifying for land remediation relief.

Capital allowances are a specialised, niche area of tax. The complexity of the legislation and precedents set by case law often results in either the tax savings not being claimed or not maximised.

The key to a successful capital allowances claim is to establish the entitlement to claim and research the history of a property before acquisition. It is also important to look beyond the clearly identifiable fixtures within a property development and understand how they will be incorporated within the building. This includes considering the importance of those fixtures to the business of the building owner and/or occupier.

Find out more about our Land Remediation services

The benefits of using our capital allowances service

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Maximising the tax relief available

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Improved cash flow

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Increased project viability

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Enabling property disposal advantages

How we deliver this service

Our Capital Allowances service is led by professionally qualified specialists with dual expertise and extensive experience in both tax accounting and chartered quantity surveying, providing specialist tax advice across all business sectors.

We add value by working with our clients’ management, consultants and finance team to fully understand the entire process and project transaction.

Our claims are extremely robust. To prepare claims, we use methodologies and formats familiar to HMRC that are designed to meet clients’ obligations regarding self-assessment. This approach, together with our detailed legislative knowledge and excellent working relationship with HMRC, often obviates the need for protracted enquiries and results in the successful, timely and cost-efficient agreement of claims.

Our services range from tax planning advice at the inception of projects through to the preparation of detailed capital allowances reports, claims and elections and subsequent negotiations and agreements with HMRC.

Our services include:

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Advice on contract negotiations for purchasers and sellers of commercial land and property

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Preparation of detailed capital allowances reports for new build, fit-out, refurbishment and regeneration projects

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Land Remediation Relief claims – 150% relief on construction and/ or mitigation work relating to the remediation of land and buildings

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Preparation of detailed capital allowances reports for purchases of second-hand buildings

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Preparation of S198 elections for purchases and disposal of second-hand buildings

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Preparation of capital allowance reports to preserve future entitlement, following 2014 legislation changes

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Enterprise Zones

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Advice on contract wording to maximise entitlement to Contribution Allowances

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Planning and design audits at project feasibility stage to maximise allowances

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Property portfolio and historical claim audits

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Portfolio sample analysis and agreement of percentages with HMRC

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Preparation of pro-forma documentation/systems for ongoing refurbishment, maintenance and build programmes

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Negotiations and agreement of claims with HMRC

Purchase of second-hand buildings

Tax relief may be available on the purchase of existing property (excludes residential). We will research entitlement to claim tax relief and produce a report to substantiate the tax relief available in accordance with HM Revenue & Customs recognised procedures.

When an existing building or buildings are purchased, and the intention is to let these properties during the planning process and/ the development phases, capital allowances may be claimed on the purchase of the existing properties and offset against the rental income.

Other Capital Allowances services

Planning and design audits

By working alongside fellow construction professionals within the organisation, HW can advise at project feasibility stage on the best design options to ensure that capital allowances are maximised without detriment to a project's commercial viability. This approach has, in some cases, enhanced the level of capital allowances available for property developments by 5% to 15%

Property portfolio and historical claim audit

These audits involve a complete examination of property portfolios to ensure that all available allowances and reliefs are claimed and safeguarded. Any shortfalls in potential claims that have, for example, been missed or moved into trusts and funds without an election are examined on a case-by-case basis to ensure that entire portfolios are as tax-efficient as possible. With the fixtures time-limit, it is essential that companies review all historic capital expenditure on fixtures to maximise their tax relief and also enable a potential future purchaser to claim (which can serve as a valuable asset to a potential purchaser).

Sample analysis

For certain large portfolios, new fit-out and refurbishment programmes, the nature of the investments can mean that it is most efficient to prepare a statistically valid sample of the level of allowances available. This can then be applied to the total capital expenditure on a percentage basis. These approaches can require up front agreement of the sample size and qualifying percentage with HMRC, an approach we are very familiar and successful with.

Pro-formas

We can prepare pro-forma documentation for our clients with ongoing refurbishment, maintenance and building programmes whose claims are prepared in-house. We are experienced with developing bespoke pro-formas and reports for our clients. Staff training and updates to pro-formas in line with current legislation and case law are also provided.