Capital allowances are a huge tax incentive supported by HMRC but all too often the opportunity to claim is either missed or disregarded.
In short capital allowances are sums of money you can deduct from you net profits in order to reduce tax and essentially receive tax free income. You receive capital allowances from valuing qualifying plant and machinery within your commercial property such as heating and ventilation systems, lighting and electrical installations through to door handles, bathroom/kitchen suites and more. Up to 45% of the property purchase price can be identified as a source of tax free income so based on this surely every commercial property owner would claim right... wrong!!
Key points
1) A capital allowances claim is based on the Capital Allowances Act 2001
2) The valuation is completed by using a HMRC accepted formula know as Section 562 Apportionment Formula
3) There are fields in both personal and corporate tax returns for capital allowances
4) Capital allowances for plant and machinery within a commercial property is shrouded in case law where precedents have been set
5) Clients can go back two years to receive a tax refund but this is not with every case
6) Clients will receive lower tax bills for current and future years
Here are the top 5 reason clients do not claim capital allowances
Sounds too good to be true
We agree that it does sound too be good true but claiming capital allowances is your right and the longer you put off looking into the subject you will carry on overpaying tax year on year.
Sounds like a scam or a loop hole
Capital allowances are neither a scam or loop hole and have in fact been around since the 1870’s and are shrouded in case law. Each and every year the government review the capital allowances regime and should they feel amendments are necessary they make changes in the finance act that follows. If you are still on the fence look up the Capital Allowances Act 2001.
My accountant has claimed them all
This is our personal favorite but all too often nothing has been claimed. Some accountants may have claimed capital allowances on additions to the property such as furniture, computers and other loose items but very few have completed a full assessment of the building as they are not tax surveyors with the relevant valuation experience.
Note: if you wish to claim all capital allowances to their fullest a specialist surveyor needs to visit the property to value the building, land and capital allowances.
Claiming capital allowances is to expensive
All we can say to this is you are speaking to the wrong firm. James Nazir & Co understand fee’s attached to capital allowances work can spiral in to the tens of thousands but in relation to the tax relief gained the fee works out to small percentage overall.
We know cash flow is key and that is why we have developed payment options and structures that will not impact your direct cash flow and will leave you better off immediately.
Note: Before we make a claim for capital allowances we need to audit the property history and this part of the process is completed under no contractual terms, so it’s free to find out if can claim.
I brought my property over 10 years ago
Whether you brought your property yesterday or 25 years ago you can claim capital allowances. There are no restrictions on how far back we can go in order to quantify the capital allowances within your property, however we can only start the initial capital allowances claim in an open tax return which is usually the one submitted 12 – 18 months ago.
Conclusion
If you own a commercial property as an investment there is no reason why you should not look in to claiming capital allowances, even if your accountants have said they have claimed them all.
To find out if you qualify visit https://www.jamesnazir.com/doiqualify and receive a free quote.