Tax relief (also known as ‘capital allowances’) on buying plant and machinery is fairly well understood, but far less appreciated are the capital allowances available on fixtures and fittings included in a building such as a new car showroom. These capital allowances could be available on the construction cost of a new building or on the purchase of a second-hand building.
Very broadly speaking, this includes expenditure on such things as electrics, heating or plumbing, where there is a function involved and the fixture retains a separate identity from the building or structure. This includes air-conditioning, radiators, fire sprinklers, burglar alarms, electronic key access systems, car wash apparatus, compressed air equipment, hoists, thermal insulation, vehicle wash water reclaim units and trunking/cabling. A tax adviser, who understands the background to capital allowances claims, may well be able to identify other costs that will also qualify as fixtures and fittings specific to that building.
Buying a second-hand building is a different matter. The same things will qualify as fixtures and fittings, but the difference is in the fact that the purchaser and seller will often be able to agree a value, as part of the purchase price, that can be attributed to the fixtures and fittings in the building. Clearly this can be the subject of negotiation, as the purchaser may well be looking for a figure as high as possible while the seller will probably be looking for a lower figure. An election will need to be made and signed by both parties and will usually mean that HM Revenue and Customs are bound by that agreement.
A purchaser should make this a priority as, without a signed election at the time of purchase, it could be a very expensive process to try and claim capital allowances. Indeed, if an election is not made within the appropriate time limit, the purchaser may not be entitled to any tax relief in the future.
There are other tax reliefs associated with building works, such as remediation of contaminated land. This could be, for example, removing asbestos from buildings or the removal of Japanese knot weed.
There is also a separate 100% allowance on assets that appear on the government’s Enhance Capital Allowances scheme, for energy saving technologies such as certain boilers or air conditioning units.
This is a very general overview as an introduction to this intricate subject. If you are considering spending money on your properties or have done so in the past, it is always beneficial to take professional advice to maximise your tax relief.
If you have any queries or would like to discuss this in more detail, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Motor team.
This article originally appeared on the blog of our member firm, Larking Gowen.