Capital Allowances

Capital Allowances

One of our areas of specialist expertise is advising clients on matters to do with commercial property ensuring they claim the maximum tax relief, or ‘Capital Allowances’, they are entitled to.

Eligible embedded capital expenditure

An important issue that we cover is ‘eligible embedded capital expenditure’ – something which can often be overlooked.  Examples of assets within commercial properties that qualify for tax relief in this category include air conditioning equipment, electrical installations, sanitary ware and many other items.  At Afford Bond we work with specialist Chartered Surveyors to ensure all such costs are identified and, where valid, Capital Allowances claims are made to HMRC.

For one of our commercial property investor clients, (with a property portfolio worth in excess of £20 million) we have been able to help the company reduce its corporation tax liability by around £64,000 a year.

Transfer of ownership

An area where Capital Allowances can get complicated is when commercial property is bought or sold, because, in theory, Capital Allowances associated with that property can be transferred to the new owners.

The complication is that the buyer and vendor have to agree the level of Capital Allowances to be passed on as part of their negotiations. Ideally agreement should be reached before completion of the sale, but if this isn’t possible, then special clauses must be included in the sales contract so that they can be finalised at a later date.

Without this documentation, the purchaser’s right to those valuable Capital Allowances could be lost forever – there is no provision for claiming retrospectively.

The starting point

To check if there are any Capital Allowances attached to a property you’re planning to buy, first make a detailed review of the replies to the pre-contract Commercial Property Standard Enquiries (CPSE’s) provided by the vendor.

Question 32 deals specifically with Capital Allowances and should give clear guidance on the level of the vendor’s original claim and the amount they are proposing to pass on.

Unfortunately, you’ll often find the response to this section is ‘not known’. That’s not good enough – don’t accept it.

Missing out on Capital Allowances could mean the loss of a considerable sum, so if the vendor isn’t co-operating, you may need to consider an adjustment to the purchase price….

How our experts can help

At Afford Bond, we have a wide range of clients in the property sector, from builders and contractors to property investors and agents.  We have proven experience and we constantly monitor the latest developments in Government strategy and legislation.   In other words, we can help you find your way safely through the minefield of Capital Allowances for commercial property and make sure you don’t lose out.

Please contact any of our Afford Bond offices for advice about Capital Allowances and commercial property. A short telephone conversation will usually help to identify whether we can help you.