Capital Allowances 101 - Show me the money!

The tax benefits of reviewing historic expenditure incurred on commercial property assets

For the purpose of this article, we assume properties have been acquired prior to 1st April 2014.  Any acquisitions made after April 2014 or currently completing will fall under entirely new rules and as such it is important to read this and it would be useful for your solicitor to read this.

As an investor with a portfolio of properties, where is the up side?

There are a number of dates that are etched into the consciousness of a capital allowances expert and they are -

1st April 2008, HMRC introduces six new asset categories and at the same time enlarges claimable plant and machinery.

22nd March 2001, CA2001 is a restatement of the legislation governing capital allowances; all capital allowances consultants carry a copy in their breast pocket… just in case!

24th July 1996, the year Jerry Maguire got the world to shout ‘Show me the money!’ and Capitus was a mere year from establishing itself!  This date also happens to be the practical limit to explore prior ownership.

We now have a structure in place to consider each property on its merits. 

For each property where the owner has an established entitlement to claim, we must then carry out a “just and reasonable” apportionment of the purchase price paid. 

To calculate this, a reconstruction cost and land valuation must be carried out, requiring (in most cases) a site survey to be conducted by a qualified Surveyor.  From here, it is possible to value and prepare a rebuild cost (including all claimable plant and machinery) for the property and finally an apportionment of the purchase price relating to those items of plant and machinery.  The eager ones amongst you will have noticed that the value applied to plant and machinery is at today’s prices and therefore (in most cases) increases the value to the current owner!

Bottom Line

This example illustrates just a few of the scenarios that apply where the purchaser acquires a typical office building.

Call us, we will be delighted to review your portfolio for free and with no obligation.  Our detailed assessment will establish and clearly set out any overlooked tax relief within your portfolio. 

Perhaps that was why Jerry Maguire was so excited!