Capital allowances for construction and refurbishment costs

Our thanks to Andrew Stanley, Managing Director of STax for this article.

Whilst there are costs associated with a building or renovation project, the good news is that there are likely to be tax allowances that you can take advantage of. All of which can have a healthy impact on your bottom line. Few businesses take advantage of their full entitlement to embedded tax benefits associated with building alteration, improvements and redevelopment. These tax benefits come in the form of capital allowances.

Capital allowances

Capital allowances are a type of tax relief for expenditure on plant and machinery (P&M), fixtures, fittings and integral features that are within a property, such as electrical distribution, heating, air conditioning and fire alarms.

Once the capital allowances have been calculated, a report is submitted to HMRC and the resulting relief will be deducted from your taxable profits and therefore reduce the amount of tax you pay. I think all business owners would welcome that!

How to go about claiming capital allowances

This is a complex area, with over a century of case law defining what is and is not plant and requires cross-discipline skill sets from both tax and quantity surveying. Very few general accountants, whilst excellent at the work they do, will have the expertise in this area to be able to accurately separate out expenditure that you can claim capital allowances on from that which you cannot.

In fact, in our experience, it is generally only the very large accountancy firms and specialist tax advisors that do have this knowledge and skillset.

Specialist firms, like STax, are a great solution for those businesses who don’t use the likes of KPMG to do their accounting.

STax will offer a deep review of the expenditure to assess the preliminary costs of your refurbishment and professional fees. They can then identify all eligible items to ensure you are maximising your claim and provide their findings to you in a full disclosure report which your existing accountant will then submit to HMRC.

How much you can claim

Whilst it will vary depending on the type of work being undertaken, the examples below give an indication of the type of savings that can be achieved by claiming your full entitlement to this relief:

Fit-out expenditure Projected allowance Corporation tax saving
£100,000 £45,000 £8,550
£250,000 £112,500 £21,375
£500,000 £225,000 £42,750

About STax

STax are specialist real estate tax advisors, combining qualified tax advisors, certified chartered accountants and chartered RICS/MICOB surveyors, head quartered in Brighton, with branches in London, Edinburgh and Plymouth.

Over the best part of the last decade, STax has grown to be one of the most respected national players in the capital allowances sector. Working seamlessly with your current advisors (general accountant, conveyancer etc.), STax is perfectly positioned to help investors in real estate maximise the benefits of their due capital allowances.

You can contact STax on 020 7147 9940 or by email.

capital allowances