Capital allowances on property are complex. Working out if expenditure is capital, knowing what qualifies under the tax legislation, and navigating sector-specific considerations are all subtleties that can be difficult to get right.
You can’t know everything. Nor should you. Seeking specialist professional advice is crucial for property businesses that want to maximise their capital allowances.
Six Forward brings certainty to the nuances of capital allowances, so you can spend more time building relationships with your clients and less time scanning legislation and trying to determine what qualifies as plant and machinery and whether a claim should be made for structures and buildings allowances.
What are capital allowances?
Capital allowances give valuable tax relief to businesses by allowing them to deduct the cost of qualifying expenditure when calculating taxable profits. This deduction can significantly impact the taxable profits of a property business by reducing the amount of income subject to income tax or corporation tax.
Allowances are given under the Capital Allowances Act 2001 to stimulate economic growth, support commercial property investment, and encourage construction. So they are a completely legitimate form of tax relief, when properly claimed.
Plant and machinery allowances are given for substantial parts of the construction costs of any new commercial building, including heating systems, electrical systems, hot and cold water systems, and much more. They are also available when buying existing commercial properties or when incurring conversion costs.
When the concept of integral features was introduced in FA 2008, the potential to claim allowances expanded significantly. Other changes introduced in FA 2012 introduced new risks and opportunities for those buying or selling existing commercial properties.
Without expert comprehension, this area of tax law is difficult to navigate. Complications particularly relate to the definition of “plant” and to preserving the valuable tax relief when buying or selling property. The introduction of structures and buildings allowances brought more tax relief but also additional complexity.
At Six Forward, our entire focus is on capital allowances, with our team of leading UK specialists who dedicate their careers to understanding both the law and the practical aspects of claiming property capital allowances. Our role is to communicate the complexities of capital allowances law and practice, so that you can confidently help your clients to reduce tax liabilities through correct and fully defensible claims, securing meaningful and lasting tax benefits.
Utilising capital allowances on property purchases
Capital allowances on property offer opportunities for property investors and landlords. A correct capital allowances claim assists cash flow, enhances asset value and creates significant tax savings for your clients.
However, claiming incorrectly can result in penalties and interest liabilities, and can leave clients open to risk for up to 20 years under HMRC “discovery” rules. An incorrect claim can also cause delays and complications with future sale agreements and due diligence processes.
The line separating “plant” from “building” is blurred, as the courts and tax tribunals continually remind us. This leaves accountants questioning where “plant” ends and “building” begins, especially when commercial properties vary widely; for example, what counts as a qualifying plant in a hotel may not do so in an office. Modern commercial buildings incorporate complex systems, and the legislation only rarely gives a clear indication of what qualifies for allowances.
Six Forward: your property capital allowances partner
Six Forward’s depth of knowledge ensures your clients are protected when making a capital allowances claim. Our specialist team will correctly allocate expenditure between costs that qualify for plant and machinery allowances on the one hand or for structures and buildings allowances on the other. To prevent problems with HMRC we will also clearly identify any expenditure for which no claim is possible.
For plant and machinery, we will advise on the most tax-efficient way of claiming allowances. We will explain when and how your clients can claim immediate tax relief by way of annual investment allowances (AIAs) or first-year allowances (FYAs). And we will allocate expenditure between “integral features” (for which special rules apply) and other fixtures, so that any claims to writing-down allowances are also made correctly.
In this way, we will ensure that your clients obtain the maximum amount of legitimate tax relief at the earliest opportunity, but that no incorrect claim jeopardises your client relationships.
Our reputation stands on integrity, accuracy and professional competence. We have a proven track record working with accountants and with property investors when they are acquiring, enhancing or selling commercial property. We frequently publish insights on claiming capital allowances across a variety of sectors, and our team writes the most comprehensive commentary on capital allowances, used by many of the UK’s largest accountants.
By leveraging Six Forward’s expertise, you can guide your clients with certainty – helping them obtain capital allowances to reduce their tax burden, ensuring that every avenue of legitimate relief is fully and correctly exploited.
Get in touch for a free consultation to learn more about capital allowances claims, and about how Six Forward can elevate your client relationships through accurate, risk-free tax advice.
