Capital Allowances 101 - A Brief History

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 for inherent plant and machinery.  This now includes everything from air-conditioning and water systems through to data cabling and lighting. 

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 is the skills applied to maximising these allowances, in the last 20 years several specialist Capital Allowances Consultancies, led by Chartered Surveyors, have set-up to ensure investors gain the full benefit of this tax relief.  This 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 they are Chartered, Quantity or Building (almost certainly all 3!), will have been 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.

This is just a very brief introduction, in the coming weeks we hope to explore what capital allowances are and how vital they are to incentivising investment. 

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