What are Capital Allowances?
Capital Allowances are the main form of tax relief for businesses investing in commercial property, and they are available to all UK taxpaying entities. This can include acquisitions, refurbishments, construction projects, and plant & machinery. Therefore, allowances would be available to businesses that have incurred capital expenditure on their commercial real estate.
Expenditure incurred by a business is either capital or revenue in nature. Revenue expenditure is generally in relation to repair works, while capital expenditure is most typically on items which provide a lasting benefit for the trade of a business. This expenditure is usually not deductible from trade profits, so a form of tax relief is obtained by way of Capital Allowances.
Tax relief on qualifying plant and machinery expenditure is provided at 18% (main rate pool) or 6% (special rate pool), on a writing down basis, depending on the item.
Assets qualifying for main rate pool include furniture, telecoms, computing equipment and associated items. Assets qualifying for special rate pool include electrical, ventilation and cold water installations.
Additionally, whilst plant and machinery are among the most claimed types of Capital Allowances, there are several other types of assets that also qualify for relief. For example, since October 2018, expenditure incurred on structures and buildings also qualifies for relief (provided at 3% straight line). You can also claim relief on research and development activities.
The Process For Claiming Capital Allowances
First, we’ll set up an initial call with one of our consultants to understand your capital expenditure programme and to establish where qualifying expenditure may be available. This is to ensure that there is the potential for tax relief to be obtained and to begin to lay out the process.
Capital Allowances can be quite complex, so at this next stage, our consultants will complete an entitlement check by reviewing relevant legal, acquisition and cost documentation including land agreements and construction schedules.
Once entitlement is confirmed, we’ll set up a ‘next steps’ call to run through our findings and explain further on how the relief will be utilised.
Our team will then carry out a detailed analysis of all project-related expenditure to categorise individual items according to the most favourable tax treatment, in accordance with the Capital Allowances Act 2001.
Following this, our team will carry out a detailed Capital Allowances site survey, covering any final queries we may have regarding the works carried out. We will also gather evidence to assist us with any HMRC enquiries.
For the final stage in the process, we will compile our analysis within a fully disclosed Capital Allowances report, ready for submission to HMRC within the relevant tax return(s).
Capital Allowances Client Testimonial
A successful project which was undertaken by our specialists comprises a client who constructed two poultry sheds at a cost of approximately £3 million.
Our expert consultants undertook a site survey which allowed them to gain a real understanding of all the costs that had been incurred. This, therefore, allowed them to create a detailed analysis of expenditure, to identify any possible tax benefits that they could claim.
Our team of Capital Allowance specialists were able to identify and secure a tax saving of over £500k for our client. This was achieved by carefully reviewing the client’s expenditure and identifying any qualifying items that could be claimed for Capital Allowances.
As a result of our specialised work, the client was able to significantly reduce their tax liability for the next four years; they were pleased to have received the advice and support of our experts which allowed them to make the most of the available tax reliefs and benefits that were available to them.
The Capital Allowances Team
Mike Horn
The Capital Allowances team is headed up by Mike Horn; Mike has been working in the Capital Allowances industry since 2014, having previously worked at both a ‘big 4’ accountancy firm and the world’s largest real estate services provider. During this time, Mike gained extensive experience in providing Capital Allowances advice to a wide range of clients across all sectors, most notably in student accommodation, industrial and logistics, healthcare, agriculture, financial services, and retail. Since launching, the team continues to grow, bringing their varied expertise to help expand RCK’s client base across the country.
Zeb Cohen
Zeb has worked in financial services since 2018 and has not looked back. Zeb’s interpersonal skills make him an industry leader in relationship management and through his extensive network in Scotland and the Northwest of England, he has helped secure funding for some of the most innovative companies in those regions.
Throughout his time in financial services, Zeb has constantly sought to break records and secure funding for the most deserving yet unaware companies in his sectors, with a focus on heavy engineering, construction, and architecture. Zeb’s success in brokering and developing relationships through unconventional partnership agreements has helped broaden his network and given him access to markets with a high barrier to entry.
Anastasiya Kokonova
Anastasiya is a Chartered Quantity Surveyor with 13 years of experience in the Capital Allowances sector. Prior to specialising in Capital Allowances, Anastasiya has worked as a Quantity Surveyor for 3 years for a large QS firm where she has gained experience in both new build and fit out projects.
Anastasiya has provided Capital Allowances advice and undertaken claims on hundreds of properties and commercial transactions and has advised a wide variety of property investors across different sectors including high net worth individuals, hoteliers, retailers, media and investment companies and owner occupiers. Anastasiya holds a Masters Degree in Corporate Real Estate Finance and Strategy.
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