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A guide to capital allowances

Gateley Capitus

For those of you who haven’t had any experience of capital allowances or are unsure of the relevance, you may find this of interest. So, best to start at the very beginning…

Capital Allowances, in an ever-evolving form, have been a fact of tax and accounting life since the Second World War. Businesses had been deducting from profits the cost of business-related machinery for more than 100 years, but things changed in 1945.

Designed as a stimulus to the rebuilding and regeneration of industry, the framework is roughly how we see capital allowances today. From this point on, investors in commercial property could claim a tax deduction for inherent plant and machinery. This now includes everything from air-conditioning and water systems through to data cabling and lighting.

Capital allowances include those items of plant and machinery that are claimable as writing down allowances against income and corporate taxation on profits – a valuable incentive to almost all businesses.

Governments of both colours have manipulated the levers of this tax incentive to a greater or lesser extent but none has fundamentally changed its raison d’etre.

What has changed are the skills applied to maximising these allowances. This has meant that over the last 20 years several specialist capital allowances consultancies, led by chartered surveyors, started to ensure investors gain the full benefit of this tax relief. It might sound odd that chartered surveyors are capable of dealing with tax matters but ask a clued up accountant and they will confirm this is one area where they are very happy to relinquish responsibility!

Why then?

Well, if you build, refurbish or purchase a commercial property, at some point in that property’s life, a property surveyor, whether chartered, quantity or building (almost certainly all three!), will be involved. Therefore, when you want to accurately price all the relevant elements of plant and machinery attracting tax relief, then the best people are those with the very same skills that built it in the first place – qualified property surveyors.

For a property surveyor, the task of analysing construction cost information or preparing a reconstruction cost and land valuation for an existing property is straightforward but without a full understanding of the legislation and relevant case law it still wouldn’t be possible to maximise the tax relief available. This is why Gateley Capitus use a blend of surveying and taxation disciplines to ensure we can both maximise and also robustly support a claim with HMRC.

In the coming weeks we will be blogging about what capital allowances are and how vital they are to incentivising investment.


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