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Markel Tax

27 Apr 2020

Unlock Cash from Capital Allowances

Capital allowances are an often-overlooked opportunity to release value from commercial property owned or leased by businesses. Many companies, partnerships, and sole traders miss out on value from these owing to a combination of misunderstanding as to what can be claimed, time limits for claiming, and limited information being available for them or their agent to determine a claim.

With businesses across the UK facing a difficult economic climate and unprecedented circumstances, it is worth spending a little time to clarify some of the myths around this area of legislation and explain how businesses may be able to reduce their tax burden or trigger a repayment from this. With the temporary increase in the annual investment allowance to £1m from 1 January 2019 until 31 December 2020, this is an ideal time to identify expenditure incurred over the last 15 months.

Where a business has purchased or improved a commercial property, they may be eligible to claim capital allowances on the value of the fixtures within that property and the expenditure incurred on these. A common myth surrounding capital allowances concerns deadlines for making a claim. Provided the business still owns the property then they are able to make a claim on past expenditure. That claim can be made in the current year’s tax return or any other open tax return. For leaseholders, the rules are similar – as long as they still have a lease with a land interest in the property, then a business is able to claim allowances on fit-out or refurbishment expenditure incurred in prior years.

One caveat is that for the annual investment allowance to be claimed on any fixtures-related expenditure, the claim must be made in the tax return for the year in which the expenditure was incurred.
A business which incurred expenditure on the extension and improvement of its premises in 2015 would still be able to make a capital allowances claim in its current tax return, even though this expenditure was incurred prior to this period. However, they would not be able to make an AIA claim on this.

Tax credits are available to companies on expenditure incurred on the removal of industrial contaminants or pollutants. Relief is available of 150% of qualifying expenditure, including surveying, extraction, and removal of such contaminants, with a 16% tax credit available for loss-making companies. Qualifying developments include both commercial and residential projects. Claims must be made within two years of the financial period in which the expenditure was incurred.

Reviewing your clients’ past investments in property and improvements may prove to be a valuable exercise. An amended return to include a retrospective capital allowance claim can trigger a tax repayment. Even if a capital allowances claim was previously made, the full available allowances are often missed due to a lack of detailed records on expenditure - contractors’ invoices may simply refer to stage payments with no breakdown.

Markel Tax’s capital allowances specialists are able to identify where expenditure may have been missed in order to maximise your clients’ capital allowances claims.

For more information, contact Adam Ellerington on 0114 212 8266 or email

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Tagged Specialist Tax Consultancy R&D tax relief Capital allowances COVID-19
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R&D and the Construction Sector – Building a claim