HOME – CAPITAL ALLOWANCES
JJMaloney has been acting specifically in Capital Allowances for over 30 years in the UK and Ireland,
Capital allowances are a tax relief available on capital expenditure incurred for investment purposes on qualifying machinery or plant and on certain buildings or structures. Expenditure can be incurred either by way of the acquisition, construction of a property or the refurbishment, fitting out or a contribution to tenant’s works in an existing property.
Capital allowances are available as a relief against either corporation tax or income tax and are deducted from profits or income prior to the calculation of tax due.
Capital allowances are most commonly available for expenditure on machinery or plant.
Capital allowances are governed by a distinct piece of tax legislation in the UK; The Capital Allowances Act 2001 (CAA2001). However for transactions falling into accounting periods predating 5th April 2001, for income tax purposes or 1st April 2001 for corporate tax purposes, the predecessor act, The Capital Allowances Act 1990 (CAA1990), would generally be applicable.
Capital allowances are the means by which UK taxpayers obtain tax relief, against their taxable profits or income, for their capital expenditure on certain fixed assets. There are numerous different forms and rates of allowances available within the CAA2001 which relate specifically to property, including:
- Plant and machinery allowances (General Pool 18% Writing Down Allowances)
- Integral feature allowances (Special Pool 8% Writing Down Allowances – 6% from 01/04/2019)
- Land Remediation Relief (Potential 150% Allowances)
- Long Life Asset allowances (plant with economic life >25 years) (6%)
- Specific Property Allowances, e.g. Industrial Building Allowances (In Ireland)
- Enterprise Zone Allowances – (100% and limit of £125 Million)
- Structure Building Allowances – (2% straight line 19/20 and 3% straight line)
The most common of all the above allowances are the plant and machinery allowances that fall into two pools, the general pool plant and machinery and special pool integral features, which are typically available, to varying degrees, within all commercial properties (offices, retail, industrial, care and nursing homes, for example).
The introduction of the Annual Investment Allowances has highlighted the importance of identifying qualifying capital allowances to maximise tax relief in the year the expenditure was incurred as failure to do so won’t attract accelerated allowances. Currently at £1 Million.
Tax relief through the utilisation of Capital allowances should be properly considered as an integral part of any property transaction. This encompasses new build, alteration and refurbishment works as well as acquisitions and disposals of existing or “second hand” property.
To minimize a balancing charge on sale an S198 / S199 – Joint Election must be correctly completed.
Don’t let your investment properties tax you!
