Tenant's Capital Allowances Claims

Capital allowances enable you to reduce your taxable profits when buying certain qualifying items. There are property allowances, plant and machinery allowances, and other allowances that businesses and commercial property investors can potentially claim, which will apply a tax relief and minimise your liability. Despite common misconceptions, claiming capital allowances is not only an option for those who own a freehold interest in commercial property. In fact, anyone with an interest in a commercial property who incurs capital expenditure can claim capital allowances on the qualifying expenditure.

There are a number of considerations to be made when looking at capital expenditure by a tenant, and the process can quickly become complicated. The team at Monetta has a wealth of experience in capital allowances for businesses, and we can advise you on your eligibility and support you to make a capital allowance claim. With our advice, you can identify any qualifying expenditure and feel confident that you are maximising your tax savings, whether you are a commercial property owner, an investor or a business director.

To learn more about how our experts can help you to extract more value from capital expenditure, contact Monetta today. Call your local Monetta office, or use our online enquiry form to request a call back at your convenience.

What are the circumstances where a tenant can claim capital allowances?

There may be several opportunities to claim allowances and, by understanding them (or seeking advice from an expert) you can make business decisions in a more tax-efficient way. When considering any of the following scenarios, you should consult an expert to assess your tax position and evaluate your approach for capital allowance purposes.

Fit outs and refurbishments

When fitting out or refurbishing an existing property, there is increased scope to claim tax relief. In the case of refurbishments, there may also be an opportunity to claim a full write-off on certain aspects of the expenditure incurred. This is possible if the works are carried out by a tenant who has occupied the space for some time, as some items related to the refurbishment may be categorised as repairs and maintenance in these cases.

Fit outs and refurbishment of existing property in this context relates to alterations of an existing envelope. The structure, floor, ceilings and walls must all have been installed previously and these works can only relate more to getting the property ready for business use. However, in order to maximise the tax relief it is necessary to fully understand the construction principles behind the works undertaken.

Works incidental to the installation or removal of plant

One of the main considerations that is often either overlooked or not fully utilised is for works that are incidental to the installation or the removal of plant. Take, for example, a tenant who wishes to install new air conditioning in an existing office. If it is deemed that the most efficient manner to undertake the works is to remove the existing ceiling, install the air conditioning and duct work and then replace it with a new ceiling, all these works are incidental to the installation of the air conditioning. As such, they may qualify for capital allowances.

Repairs and maintenance expenditure

Properties that are deemed to be capable of use, or indeed are currently in use, may attract a high level of expenditure categorised as repair and maintenance. It may be possible to claim capital allowances if the works can be considered a ‘like for like’ replacement or the ‘modern day equivalent.’ Tenants incurring such expenditure could categorise it as revenue if they have occupied a property for some time.

Can capital contributions affect allowances?

Incentives may be offered by a landlord to induce a tenant to sign a lease, in the form of rent-free period or a capital contribution. A rent-free period will have no impact on the capital allowances claimable for either party. However, a capital contribution may have an impact.

There are a number of reasons why a landlord will provide a capital contribution to a tenant. As already highlighted, this could be a form of incentive to encourage a tenant to sign the lease. Alternatively, it could be used towards the fulfilment of provisions that would be typically made by the landlord, but which a tenant will be better positioned to undertake. Stripping out a previous tenant's fit-out is one example that frequently arises.

When a tenant is in receipt of a capital contribution, it may be to their advantage to highlight the expenditure that is deemed to be the landlords versus the expenditure deemed to be the tenant's. For example, the tenant will arguably provide a greater level of trade specific items than a landlord. As such, these items could be high in allowable expenditure. If the expenditure is not split from the onset then these allowances may need to be shared, which reduces the value that the tenant can claim.

Why choose Monetta?

The process of assessing your eligibility, identifying qualifying expenditure and claiming capital allowances can be complex. The team at Monetta has a wealth of experience in this area, and with our knowledge of the specific tax laws that affect each industry in the UK, we can offer tailored advice based on the unique circumstances you are in.

Because we understand all of the different types of tax relief that may apply, we can advise you on structuring decisions in the most tax-efficient ways. The strategic use of capital allowances can improve your business' tax position and maximise the value of property or other assets. Monetta has advised organisations of all sizes throughout the UK to do exactly that.

Contact us

No matter your interest in a commercial property, our team can help you to identify qualifying plant and machinery or refurbishment and fit-out expenditure and claim capital allowances on your outgoings. By reducing your taxable profits, you can minimise your liability and strengthen your financial position.

To learn more about how we can help in your specific case, get in touch with Monetta today. Call your local Monetta office, or use our online enquiry form to request a call back at your convenience. Alternatively, you can browse our team page to learn more about our capital allowances experts.