Why are Capital Allowances important on commercial property?

The rules are in Capital Allowances Act 2001.

Sections 21 and 22 explain the Assets which can’t be claimed and Section 23 lists items that can be claimed

Expenditure unaffected by sections 21 and 22
1. Machinery (including devices for providing motive power) not within any other item in this list.
2. Electrical systems (including lighting systems) and cold water, gas and sewerage systems provided mainly—(a) to meet the particular requirements of the qualifying activity, or (b) to serve particular plant or machinery used for the purposes of the qualifying activity.
3. Space or water heating systems; powered systems of ventilation, air cooling or air purification; and any floor or ceiling comprised in such systems.
4. Manufacturing or processing equipment; storage equipment (including cold rooms); display equipment; and counters, checkouts and similar equipment.
5. Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
6. Lifts, hoists, escalators and moving walkways.
7. Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
8. Computer, telecommunication and surveillance systems (including their wiring or other links).
9. Refrigeration or cooling equipment.
10. Fire alarm systems; sprinkler and other equipment for extinguishing or containing fires.
11. Burglar alarm systems.
12. Strong rooms in bank or building society premises; safes.
13. Partition walls, where moveable and intended to be moved in the course of the qualifying activity.
14. Decorative assets provided for the enjoyment of the public in hotel, restaurant or similar trades.
15. Advertising hoardings; signs, displays and similar assets.
16. Swimming pools (including diving boards, slides and structures on which such boards or slides are mounted).
17. Any glasshouse constructed so that the required environment (namely, air, heat, light, irrigation and temperature) for the growing of plants is provided automatically by means of devices forming an integral part of its structure.
18. Cold stores.
19. Caravans provided mainly for holiday lettings.
20. Buildings provided for testing aircraft engines run within the buildings.
21. Moveable buildings intended to be moved in the course of the qualifying activity.
22. The alteration of land for the purpose only of installing plant or machinery.
23. The provision of dry docks.
24. The provision of any jetty or similar structure provided mainly to carry plant or machinery.
25. The provision of pipelines or underground ducts or tunnels with a primary purpose of carrying utility conduits.
26. The provision of towers to support floodlights.
27.The provision of—(a) any reservoir incorporated into a water treatment works, or (b) any service reservoir of treated water for supply within any housing estate or other particular locality.
28.The provision of—(a) silos provided for temporary storage, or(b) storage tanks.
29. The provision of slurry pits or silage clamps.
30. The provision of fish tanks or fish ponds.
31. The provision of rails, sleepers and ballast for a railway or tramway.
32. The provision of structures and other assets for providing the setting for any ride at an amusement park or exhibition.
33. The provision of fixed zoo cages.

Sections 21 and 22 do not apply to any expenditure to which any of the provisions listed in subsection (2) applies.

(2)The provisions are—

section 28 (thermal insulation of industrial buildings);

section 29 (fire safety);

section 30 (safety at designated sports grounds);

section 31 (safety at regulated stands at sports grounds);

section 32 (safety at other sports grounds);

section 33 (personal security);

section 71 (software and rights to software);

http://www.legislation.gov.uk/ukpga/2001/2/part/2/chapter/3

As CATAX say in their video 9 out of 10 commercial building owners are not claiming these capital allowances!

The key reason why they aren’t claiming is because when you buy or develop a building the costs don’t tend to be broken down to show these items so you need to have them retrospectively assessed by a surveyor.

If you are buying a commercial property the CPSE will ask the seller about Capital Allowances. Sellers will need to pool their fixtures expenditure (even where they have not, nor do not wish to claim allowances themselves) unless they are prepared to risk the price of their property being chipped down in recognition that no allowances will be available.

https://www.taxation.co.uk/Articles/2014/04/08/323051/good-bad-and-ugly

Often at the time of Sale a Section 198 will agree the Capital Allowances

CAA01/S200 – S201An election under CAA01/S198 or S199 must be made by notice in writing to HMRC.

It should contain the following information:

* the amount fixed by the election, 
* the name of each person making the election, 
* information sufficient to identify the fixture and the relevant land, 
* particulars of the interest acquired by or the lease granted to the purchaser; and 
* the tax district references of each of the persons making the election. 
  
The election is irrevocable. 

The time limit for making the election is two years after the time when the interest is acquired by the buyer or the buyer is granted the lease. 

A copy of the election must be included with each party's return for the first period affected by it. This will normally be the period in which the disposal or acquisition takes place. 

The amount apportioned to the fixture must be quantified when the election is made. 

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca26850

steve@bicknells.net