Capital Allowances are a form of tax relief given on eligible items of ‘plant and machinery’. They reduce your taxable proﬁt and therefore the amount of tax you pay. As well as loose items like vehicles or furniture, they are available on ﬁxtures (electrics, plumbing, lifts etc.) in commercial and some residential properties.
The tax benefits of these items are often overlooked, as their value is included in the purchase consideration of a property or hidden amongst ambiguous construction invoices. Because of this, many property owners are unaware of the pregnant value their buildings carry on fixtures they already own and have a right to claim against. Due to the complexities of valuing and claiming these items, most businesses are under-claiming their rightful amount of Capital Allowances. This has resulted in tens of billions of pounds of tax relief going unclaimed, so you might very well be sitting on a substantial untapped tax windfall. To effectively value and claim these items requires a unique combination of skills spanning taxation and quantity surveying i.e. the services of a specialist like STax. In most cases there is no time limit on how far back you can look to claim against your expenditure. This means you could have purchased a property 10 years ago and you can still claim today. Relief from this historic expenditure can be carried back using the amendment window of your tax return. This can not only deliver tax savings but also potentially rebates on past taxes paid.
Most residential units are excluded from claiming Capital Allowances, however, if your property meets the furnished holiday let criteria, it becomes taxed more akin to a commercial property. The chief benefit of this change is the ability to claim Capital Allowances on both loose items of plant and the fixtures.
We have worked extensively in sector from bulk investors buying large inner-city blocks, developers building holiday parks for fractional sale to individual investors looking to realign their buy to lets.
The name Furnished holiday lets is often miss leading as most are not let to holiday makers instead put to key workers and those travelling for business.
The average freehold claim is 25% of the purchase consideration with leasehold units pushing up to 30% due to the shared structural costs. This can mean the profits from a furnished holiday let being tax free for many years.
Hotels can contain a startling high density of plant and machinery fixtures. We have worked on a wide variety of projects from the purchase of guest houses to the fitting out of entire holiday complexes.
In the leisure industry the appearance of the customer facing floor space is crucial to the success of the business. Because of this, a wider number of items that create that mission critical ambiance are eligible for Capital Allowances than in most other industries. This can make hotels the Rolls Royce of properties for Capital Allowances claims!
Capital Allowances can be available on sanitaryware, hot and cold water, building management systems, bar and restaurant fittings, heating, air handling and even chandeliers to name a few fixtures.
Acquisition claims on hotel can range between 30% to 50% of the purchase consideration with renovation projects coming in even higher.
Whilst not the bulk of our work, owners and operators of zoos can benefit greatly from claiming their full entitlement to Capital Allowances.
Claims can cover items like the underlying utility infrastructure, security systems and even the zoo cages themselves. A large proportion of the capital allowance value will flow from the installations in the visitor areas like the restaurants, play areas and shops to name a few. This effectively makes a zoo a collection of a number of different building types combined, with obviously a few animals present too.
Claims on zoos can sometimes be as high as 40% to 50% of the qualifying expenditure!
We have found GP and dentist surgeries to both have a high instance of property ownership and investment in fitting out to be fit for purpose. Both areas throw up a plethora of opportunities to access substantial Capital Allowances value.
Capital Allowances claims encompass many specialist systems such as patient displays and supporting utility infrastructure to medical equipment. Capital Allowances are also on the more generic systems that under pin the operation of the property e.g. heating, sanitaryware etc.
Capital allowances claims on doctors’ surgeries range greatly between 20% to 30% depending on the age of the construction and location. Fitout expenditure can regularly contain 50%+ capital allowances eligibility resulting in a substantial cash saving.
Over the years we have worked on a wide range of care and nursing homes. Properties have ranged from specialised smaller homes for those with a particular need to large more standard homes for the elderly.
A large part of the capital allowances available will come from the systems like electrical distribution, water and space heating, sanitary ware, internal communications, fire alarms and suppression systems to name just a few fixtures. They will also often extend to cover more specialist medical installations and the supporting utility infrastructure. These areas combine to make claim Capital Allowances on care homes a very attractive proposition.
Capital allowances claims on care homes range between 25% to 30% with renovation and construction projects coming in even higher.
We have worked on a significant number of industrial units over the years. These have come in all shapes and size from every combination attached/integrated office space imaginable to being purely for the refrigeration and storage of more potatoes than most people will ever see in one place.
A large part of the Capital Allowances available will come from the systems like electrical distribution, water and space heating, AC and ventilation systems, security and fire alarms and a plethora of other fixtures.
Claims can vary greatly from lows of 10% up to 30%. This depends on the format of the property in question. For example, a warehouse is likely to have a much lower density of Capital Allowance eligible fixtures due to the large amount of empty space for storage of goods. Whereas a meat process plant will be loaded with refrigeration and processing equipment with the utility infrastructure to match.
Our work in this sector has been broadly split 50:50 between the acquisition of freehold/long lease hold interests and development / fit out projects. Both are particular exciting in this sector.
In the leisure industry the appearance of the customer facing floor space is crucial to the success of the business. Because of this a wider number of items that create that mission critical ambiance are eligible for capital allowances than in most other industries.
Examples of Capital Allowances eligible fixtures include decorative assets, commercial kitchen equipment, utility infrastructure, signage, extraction systems and many more.
Unrestricted acquisition claims regularly exceed 35% of the purchase consideration with fits normally far exceeding 50% of the spend in terms of available capital allowances.
The backbone of our work is on office space of one form or another. From 1,000 square foot above a retail unit to 30 storey skyscrapers, STax have delivered substantial Capital Allowance value to both trades and investors like.
Where the majority of our work in this area is for the owners of freeholders and head lease interests we have undertaken a significant number of review on fitout and redevelopment expenditure and to date have never failed to deliver a material amount of additional (above that identified by their general advisors) relief to our clients.
Capital Allowances can be available on the hot and cold-water systems, sanitaryware, lifts, fixed furniture, fire alarms and suppression systems, air handling and conditioning to name just a very small number of the qualifying systems found in most offices.
The average unrestricted acquisition claim on an airconditioned office with lift, is 25% of the purchase consideration. For an additional rate income taxpayer that’s over 11% of purchase price back in saved tax!
In the same way that we would not provide any legal advice to our clients, the majority of solicitors shy away from giving tax advice. Unfortunately, this can leave a marked gap in the service you provide as tax is often a key element of the of an instruction. Not addressing Capital Allowances correctly can result in substantial financial loss to clients and in some extreme instances your firm facing a negligence claim. Capital Allowances are particularly relevant during a conveyance. Non-compliance with the Capital Allowances requirements can result in the loss of all entitlement to this valuable relief and even a claw back of past relief claimed resulting in a surprise tax charge, not to mention an unhappy client! We can cover all your Capital Allowances requirements ensuring your clients get best advice upholding your firm’s duty of care.Read more
All trades and investors are eligible to claim Capital Allowances. Capital Allowances can potentially be released from capital expenditure relating to a program of works or even a proportion of the purchase consideration of a property. As Capital Allowance specialists, our role is to assist you in maximising claims for the Capital Allowances to which you are entitled. This is to make sure the correct amount of tax is paid and not a penny more. There is no need to tip HMRC!Read more
All trades are eligible to claim Capital Allowances. Capital Allowances can potentially be released from capital expenditure relating to a program of works or even a proportion of the purchase consideration of a property. As Capital Allowance specialists our role is to assist you in maximising claims for the Capital Allowances to which you are entitled. This is to make sure the correct amount of tax is paid and not a penny more. There is no need to tip HMRC!Read more
We spend a large amount of our time advising the advisors. Capital Allowances on fixtures is a highly specialised niche area of tax with over a 100 years’ worth of case law to contend with. Furthermore, providing effective Capital Allowances advice requires a marriage of disparate skills from taxation, accounting and quantity surveying that you simply won’t find in any but the very largest accounting firms in the country (KPMG, PWC etc). STax combines all these skillsets required to provide robust Capital Allowances advice under one roof, making us perfectly positioned to assist your clients’ in claiming their full entitlement to Capital Allowances. We are also keenly focused on ensuring your clients compliance with all Capital Allowances legislation, especially when a building changes hands. We work with a large proportion of the general practice firms in the UK to meet their clients’ Capital Allowances needs.Read more
STax works closely with many different types of property professionals, from commercial agents to LPA receivers assisting their clients to claim their full entitlement to Capital Allowances.
Whilst putting forward Capital Allowances can seem like a departure from your core message, it can make a huge difference to your clients' net investment outcomes. This can add value to your relationship with your client by delivering significant tax savings on their real estate assets. It can not only deliver extra revenue into your business but also give you a considerable competitive edge over your rivals by adding another differentiating factor to your service offering.
Capital Allowances are often overlooked when administrators or receivers are appointed. Whilst verifying details of past actions can be tricky, once the insolvency professionals are appointed, if there are any unclaimed Capital Allowances available STax are perfectly positioned to quantify any due Capital Allowances therefore recovering more for the stake holders.
Due Capital Allowances can be carried back against past taxes paid potentially access further cash for creditors.
If in the likely instance there haven’t been profits for some time and therefore no tax liability to claim back, any Capital Allowance claimed can be potentially transferred on an incoming owner either for extra consideration or to help lubricate the deal to secure a favourable sale.
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With just the property address and purchase price we can conduct some background research and provide an initial indication of the estimated Capital Allowances
After speaking with the client and answering any questions they may have regarding Capital Allowances and the process of claiming these, we will issue our Engagement Paperwork, to be signed and returned
Once the paperwork has been received, our team will ask the client for a copy of certified identification and proof of address for AML checks
After the AML checks have been completed, we will be contacting the client’s Accountant and Conveyancing Solicitor as well as checking the property history with Land Registry and previous owners. This usually takes 2-4 weeks
Once we have the information returned from all parties, our team will have the full picture. We can then determine if a claim is possible. In the unlikely event no claim is possible, there will be no charge for the time invested
At this stage, our team will liaise with the client and tenants to arrange a site visit. One of our Chartered Surveyors will visit the property at a time that is convenient for all parties
After our Surveyor has conducted his visit and listed all items eligible for Capital Allowances; he will send the site data as well as supporting photographic evidence to our Tax Advisers and Chartered Accountants for review
With all checks complete, research and logged all eligible items. The information will be analysed and an extensive, full disclosure report showing a breakdown of all newfound Capital Allowances is issued to the client. This report can then be forwarded to their Accountant for submission to HMRC. At this stage, our invoice will be issued for payment
Something great has been cooking over at the STAX camp!
We are pleased to announce that our new website will be launching tomorrow.
Our aim and focus has been on creating a site that gives potential clients all the information that they need to understand Capital Allowance, and move forward with their Capital Allowance review.
So if Capital Allowance is something you're considering or something you want to know more about then head over to www.s-tax.co.uk at lunch time on Thursday 18th June.
We have some great features coming over the coming weeks so keep your eyes peeled.
Keep safe from everyone at STAX HQ.
Our super coding team are working hard to bring you the STAX calculator our aim is to give you, our clients, a clear estimation of what Capital allowance you may be entitled to.
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We are now a part of the EMW Law family.Check out EMW's website