Capital Allowances on Commercial Property: A Simple Guide

 There are few tax breaks for owners of commercial property in the UK, so it may be a surprise to learn that the few that are available are underclaimed (or not claimed at all). However, these valuable allowances can go a long way towards reducing your tax bill, so it is important to make use of the ones that are available to you.

What Capital Allowances Are Available on Commercial Property?

There are various capital allowances available, but in terms of commercial property there are allowances for structures and buildings. If you build, buy or lease a structure and the construction contracts were signed on or after 29^th October 2018, you may be eligible for tax relief.

There are various caveats, and the building or structure must:

·         Not have been used as a residence the first time it was used

·         Be used for a qualifying activity

·         Have an allowance statement (this statement includes details such as address, description, date of construction and qualifying costs).

How Much Could I Save?

If your structure or building is eligible and your company pays corporation tax, you will be able to claim 2% tax relief on the costs for the period 29^th October 2018 to 31^st March 2020 and 3% tax relief on the qualifying costs from 1 April 2020 onwards. If your business is subject to income tax, the dates differ slightly and you can claim 2% between 29^th October 2018 and 5^th April 2020, and 3% from 6^th April 2020 onwards.

The capital allowances on commercial property are available for a period of 33 and one third years from the allowance period start date, so this can add up to a sizeable sum.

Build or Buy?

Whether you built or bought your structure, you may still be able to make a claim. If you built it, your claim will be based on the amount you spent on construction costs. If you bought it unused from a developer, the capital allowances for the commercial property will be based on the price you paid to the developer. If you bought the property unused from someone who is not a developer, the amount you can claim will be based on the lower of either the price you paid or the original construction cost.

What Must the Building Be Used for To Be Eligible for Capital Allowances on Commercial Property?

The building must be used for qualifying activities. These are:

·         Any trades, professions and vocations

·         A UK or overseas property business

·         Managing the investments of a company

·         Mining, quarrying, fishing, running railways and toll roads.

If your building isn’t used for one of these activities, then you won’t be able to make a claim.

Where to Go for Advice

At Areande, our team are experts in claiming tax relief. We will be able to check your eligibility and advise you about your claim. You can easily Areande today and we will be happy to help.