What Are Capital Allowances?

MAXIMISING YOUR PROPERTY INVESTMENT – CAPITAL ALLOWANCES & ACQUISITIONS

Even though capital allowances have become more widely utilised over the last decade or so they are still an often misunderstood and under utilised area of property investment. By maximising the capital allowances available on the acquisition of a property the investment performance of that property can be improved dramatically.
Due to the complex myriad of legislation and issues surrounding capital allowances it is imperative if one is to maximise the capital allowances to consider them at an early stage in the transaction. Only by doing this can certain structures, arrangements or investigations be put in place to achieve the objectives. In certain instances these must be addressed prior to acquisition otherwise it will be too late, the maximum benefit will never be realised and the investor will be required to pay more tax than would have been necessary.
It is equally important where you have claimed capital allowances to consider the impact of a sale and to put in place as part of the head of terms and the contract the relevant documentation to secure your position on the sale and to avoid a claw back of the allowances that have been claimed.

What Are Capital Allowances?

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.