Muras Matters: Capital Allowance Claims on Commercial Premises

Capital Allowance Claims On

Commercial Premises



The rules on capital allowances have changed significantly in recent years and an industry report recently suggested that capital allowances on commercial premises were significantly underclaimed by as much as £1.6 billion on transactions taking place between April and December 2014.

In addition there are still common misconceptions that a capital allowance claim on a property is only a timing issue or that it will affect the base cost for a capital gain. If the property is being sold at a profit then the calculation of the capital gain will not be affected by a capital allowance claim.

Current Rules

Broadly, trading businesses can claim a capital allowance deduction from their taxable profits based on expenditure on fixtures and fittings contained within a building. For example, a boiler installation or fire safety signs can qualify. Commercial premises includes furnished holiday lets but not residential property.

Since April 2014, the purchaser of a commercial property can only claim capital allowances on the fixtures and fittings if the allowances were ‘pooled’ by the seller prior to disposal, otherwise the allowances are permanently lost. This means that any possible claim should be reviewed before selling a property.

In addition the capital allowance value must be agreed by both the seller and the purchaser, or the matter is referred to a tribunal to decide. The value will have tax implications on both sides of the transaction therefore it important that all sides take advice on the consequences of the valuation.

What if no claim has been made previously?

It may be possible for capital allowance claims to be made for items added to the building some time ago. It may be that no allowances or only low amounts are available, but a potential claim must be reviewed in order to ascertain any allowances due.

If you have incurred significant expenditure on extending, purchasing or renovating a commercial property and you wish to be sure that all available allowances have been claimed, or you are considering selling a property then please contact our Tax Director, Jenny Marks.

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