Capital Allowances on Commercial Property

Claiming capital allowances is one of the key ways that businesses in the UK can minimise tax liability. In particular, capital allowances on commercial property can represent a significant form of tax relief and lead to significant tax savings. If your organisation is involved in the property market, your business assets include commercial properties, or you are intending to buy a commercial property, capital allowances offer potential tax savings that are worthwhile to consider before making your decision.

It can be valuable to work with an experienced accountant when you pay tax and claim allowances. The team at Monetta can support you to identify qualifying expenditure and meet the legal requirements for a capital allowances claim, to help you avoid the penalties for non-compliance. We can also identify other capital allowances, tax relief opportunities and ways for your business to save money at the end of the financial year.

Contact Monetta's commercial property experts today to learn more about how we can help with tax relief and allowances. Call your local Monetta office or use our contact form to send us a message.

What are capital allowances?

In the UK, depreciation of fixed assets is a non-allowable expense and therefore it is not deducted when ascertaining taxable profits. However, certain types of capital expenditure may qualify for capital allowances, which are the only form of tax relief available on such expenditure. Capital allowances are therefore an effective method for Income and Corporation Tax payers to retain their hard earned profits.

While claiming capital allowances on vehicles, computers and furniture and equipment is relatively straightforward, dealing with expenditure on the acquisition, fit out, refurbishment, extension or construction of commercial buildings requires a combination of surveying, property and tax skillsets to maximise the available tax relief. Even so, any company paying Corporation Tax will want to obtain capital allowances tax relief where it can.

Plant and machinery allowances (PMAs) are available for expenditure incurred on business equipment, including ‘fixtures’ in commercial property.  These fixtures are assets that become part of the property in law.

When considering commercial property there are two main categories for PMAs:

• Special rate PMAs: this includes “integral features” (i.e. electrical power and lighting; hot and cold water installations; heating, ventilation, lifts, thermal insulation to existing buildings (i.e. with a useful economic life of 25 years or more); and
• Main pool assets: are all other plant and machinery that is not special rate.

There are different rates at which the PMAs can be realised, including through 100% first year allowances. This is possible by utilising annual investment allowances or taking advantage of full expensing by 100% first-year or 50% special-rate allowances. Therefore, in any given project, you could have a mixture of 100% first year allowances to a 3% writing down allowance for the structures & building allowances. This is only a guide to the potential savings that are available, and you should speak to a capital allowances accountant for specific guidance.

Over the last few years, the legislation has become increasingly complex with the addition of new forms of capital allowances and the removal or amendment of other allowances. It has become more difficult and complicated to claim capital allowance relief without the risk of noncompliance with your tax liabilities under the law. The use of chartered surveyors with experience and knowledge of the capital allowances legislation coupled with the know-how of construction can greatly enhance the capital allowance claim. Monetta's team can identify valuable tax relief opportunities for your business and support any capital allowances claim on commercial property to minimise your tax bill.

Who can claim capital allowances on commercial property?

If you have incurred capital in purchasing, building, or improving a commercial property and you are subject to Income or Corporation Taxes, then you can claim capital allowances. Individuals paying Income Tax and looking to claim allowances should visit our

Generally to claim capital allowances, you must meet the following criteria:

• You incur capital expenditure on qualifying assets.
• You must have an interest in property.
• The assets should be used for business purposes.
• You are subject to UK Corporation Tax or Income Tax.

Pensions, charities and property developers will generally not be able to claim capital allowances, even if they are individuals paying Income Tax or a company paying Corporation Tax. However, understanding the value of the capital allowances could allow them to better understand any future disposal strategy.

How to claim capital allowances

Each claimant is responsible for identifying their capital allowances entitlement, as it is not granted automatically. The capital allowances must be claimed within a tax return. While there is no time limit for claiming capital allowances, you must still own the asset when you are first making a claim - so if you are involved in trading property, there may be circumstances where you find you are too late to claim tax relief on a particular asset.

In addition if you wish to take advantage of full expensing or utilising your annual investment allowances, the capital allowances must be accounted for in the year of expenditure. Speak to an experienced commercial property accountant for advice on claiming allowances effectively and planning taxes to benefit from the maximum amount of tax relief.

Why choose Monetta?

At Monetta, our capital allowance experts can support you to minimise your tax liabilities when it comes to commercial property. That includes everything from identifying applicable reliefs to calculating the optimal ways to save, and helping you to file Income Tax or Corporation Tax returns to take advantage of these reliefs. We have worked with businesses of all sizes throughout the UK to reduce their taxable profits and capital expenditure generated by building or acquiring commercial property.

We also offer a variety of accounting and bookkeeping services to help businesses maintain compliance and benefit from insights when making consequential decisions. A property transaction can be much more cost-effective and tax-efficient with our advice on deal structures, annual investment allowance (AIA) and any other tax reliefs that apply. Get in touch with our team to learn more about how we can support investments in commercial property today.

Contact us

If you are incurring capital expenditure by purchasing, upgrading or building commercial property and are looking for the most tax-efficient way to manage your outgoings, contact the experts at Monetta. We offer a comprehensive suite of services for businesses and individuals throughout the country from our network of offices in the North West. Beyond identifying assets qualifying for tax relief, we can advise you on structuring business deals and ways to enjoy full tax relief from your dealings in the commercial sector.

To learn more about how we can help, contact Monetta today by calling your local office directly, or filling in our enquiry form to request a call back at your convenience.​​