Frequently asked questions
We know there are lots of questions about the complexities of Capital Allowances. We hope we have answered most of these, but if you do have any other questions please get in touch and we’d be happy to help.
Capital Allowances in the UK are a form of tax relief available to owners and occupiers of commercial property. They allow you to deduct the cost of certain items within your property from your taxable profits, spreading the cost over several years.
The system applies to purchased, constructed, fitted-out, and refurbished commercial properties.
- Plant and Machinery Allowances (PMAs): These are claimed at 18% per year on a reducing balance for plant and machinery.
- Integral Feature Allowances (IFAs): Claimed at 6% per year on a reducing balance for integral features of a building.
- Annual Investment Allowances (AIAs): You can write off the full value of qualifying items up to a set limit in the year of purchase.
- Enhanced Capital Allowances (ECAs): Offer 100% relief in the first year for certain environmentally friendly or location-specific assets.
- Structural & Building Allowances (SBAs): Not strictly Capital Allowances, but they offer a 3% relief per year on the construction of commercial buildings.
Yes, there were significant changes starting from 1 April 2014. These mainly concern the process of claiming and transferring Capital Allowances during the sale and purchase of properties.
If Capital Allowances are not identified and documented during the property transaction process, the opportunity to claim them could be lost.
Your legal team should issue an “Enquiries Before Contract” questionnaire to the seller to uncover any existing Capital Allowances, which should be detailed in the contract.
The answers determine if and how Capital Allowances have been claimed and how they can be transferred. Incorrect interpretation can lead to losing the right to claim.
You’ll need an Election Notice, which is a formal agreement that transfers the claim to you, the buyer. It’s a binding legal document for both parties and HMRC.
Yes, a specialist can help identify and value Capital Allowances within your property purchase, as most accountants may not have the specific expertise required.
Absolutely, Capital Allowances and their limits can change based on the annual Budget released by the chancellor.
You would need to pay back any tax relief claimed if you sell the building within 34 years.
Failure to claim or properly transfer Capital Allowances can mean a significant financial loss. It’s estimated that less than 10% of eligible allowances are claimed.
The AIA limit is currently to £1,000,000 per annum, but this might be changed in any future budget. It is a politically motivated limit so nothing can be guaranteed.
Definitely not. You decide what your depreciation is for your business. Capital Allowances is set down by tax regulation. You cannot manipulate it for your own benefit.
The only similarity is the word “Capital.” Capital Gains Tax is a tax you pay on the value of the building when you sell it compared to value when you purchased it. Capital Allowances do not actually reduce the value of the asset.
I focus purely on my specialism – Capital Allowances. I work very closely with accountants to maximise tax savings available to their clients and my clients.
Our fees will come out of what we have saved you, so all it will cost you is your time. We set our fees at: up to 4% of the certified value of the claim prepared but with larger projects this percentage will be much lower. In the case of Election Notices and other property related legal advice we charge a flat rate fee of £70/hour. Value Added Tax will be applicable to these fees.
Sponjem UK offers a tangible financial benefit, reducing your tax bill and improving cash flow. If you have more questions, please get in touch.