Bruton Knowles talk commercial property and capital allowances

Angus Taylor

Angus Taylor - Credit: Archant

It is estimated that 90 % of commercial properties could have unclaimed tax allowances

Up to 90% of commercial property owners across Gloucestershire could be missing out on tax allowances on their property purchases, according to property consultants Bruton Knowles.

Angus Taylor, Partner at Bruton Knowles, said they were highlighting the issue as many owners appeared to be unaware of the extent of entitlements, which have recently been changed.

He said: “With the commercial property market starting to show signs of a significant upswing in confidence this issue has now been brought to the fore.

“Businesses are on the move again but many potential owners seem to have missed the small print regarding capital allowance claims. When weighingup the costs for each prospective site, owners need to take into account the fact that all commercial buildings have claimable allowances inherent within the purchase price.”

He added: “It is staggering to think that up to 90% of commercial properties in the UK have unclaimed allowances and many businesses appear unaware of the extent of their entitlements.”

Capital allowances give tax relief for property owners, occupiers and investors. There are several types of allowances, applicable to different asset categories. The principal forms, found in all commercial properties are: plant and machinery; and integral features.

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There are also capital allowances for short-life assets, long-life assets and energy-efficient and water-saving assetsAngus Taylor said qualification was based on three basic rules.

You must be a UK commercial taxpayer, own UK commercial property with a purchase price greater than £200,000 and the property must not be owned by pensions, charities or developer.

“Capital allowances are retrospective claims based on the original purchase price of the building and can be claimed on a long list of plant and machinery alongside a whole host of other items.

“Although capital allowance claims arenot new, the law governing such claims has been significantly revised by the Finance Act 2012, which came into full effect with the new tax year back in April 2014. “

From April 2014 all commercial property owners now need to have pooled capital allowances before they sell the property (mandatory pooling). Thisis so the vendors and prospective buyers can transfer the allowances across with the sale of property by way of section 198 election.

This process is beneficial to both parties as the vendors may be able to sell the allowances to the buyers on top of the agreed purchase price of the property and the buyers can receive taxable benefits with the property purchase.

If Capital Allowances are not pooled by the vendors when the property is sold then any potential allowances will be lost within the transaction Because of the above new rule change, if Capital Allowances are not pooled by the vendors, the buyers could take action for losses if the vendors were ill advised on Capital Allowances. Don’t let this happen to you.

Angus said: “This means that in future it will only be possible for a purchaser to make a claim if a joint election is made between the contracting parties or a value is assigned for the fixtures by a tax tribunal.

“To benefit from capital allowance claims it is therefore important for both parties to the transaction obtain a detailed breakdown of the cost of new buildings or alterations to existing buildings. This allows a proper apportionment of the claimable items.”

He concluded: “As allowances on typical commercial buildings can amount to almost a third of the purchase price or building cost, it would be a serious disadvantage to any property owner not to fully capitalise on the tax relief available when making a move.”


Visit or follow @BrutonKnowles for more advice.