Embedded capital allowances are a valuable yet often overlooked aspect of tax relief for business owners in the UK. These allowances can be claimed on certain fixed assets that are “embedded” within a property, such as heating systems, electrical installations, air conditioning, lifts, and other integral components of the building. By claiming these allowances, property owners can deduct a portion or the entire cost of these assets from their taxable profits, ultimately reducing their overall tax liability.
How Do Embedded Capital Allowances Work?
Embedded capital allowances can only be claimed on assets used for business purposes. They are claimed annually and deducted from taxable profits, resulting in a lower tax liability for the property owner. The process of claiming embedded capital allowances is similar to how assets are depreciated in financial accounts. HM Revenue & Customs (HMRC) sets specific rates based on the type of asset and its expected useful life. These rates determine the amount that can be claimed each year.
It is important to note that there are different types of capital allowances available, including the special rate pool (integral features), general pool (plant and machinery, fixtures, and fittings), first-year allowances (FYA), annual investment allowance (AIA), full expensing (from 1 April 2023), super-deduction (up to 31 March 2023), and 50% first-year allowance. Each type of allowance serves a specific purpose and provides different levels of tax relief.
The Benefits of Claiming Embedded Capital Allowances
Claiming embedded capital allowances can have significant financial benefits for business property owners. These allowances can help reduce the overall tax liability, allowing owners to retain more of their income. For example, an industrial unit costing £500k may have approximately £75k of embedded capital allowances available, while a building costing £1m may have around £150k of tax allowances due. These amounts can make a considerable difference when it comes to tax payments.
Furthermore, there is no time limit on claiming for a property bought or built before April 2012. However, new rules impose a time limit on claiming embedded capital allowances for properties bought or built since April 2014. It is crucial to take action as soon as possible if you plan to sell a business property, as claims cannot be made retrospectively. Addressing embedded capital allowances within the Contract of Sale becomes essential in such cases.
Who Can Claim Embedded Capital Allowances?
Any business property owner can claim embedded capital allowances as long as the property is freehold, owned by the company, directors, partners, or husband and wife, and is a UK taxpayer. However, these allowances are not available if the property is owned by a pension fund or other non-tax paying entities. It is essential to meet these criteria to be eligible for claiming embedded capital allowances.
The Process of Claiming Embedded Capital Allowances
While claiming embedded capital allowances can be a complex process, it is generally recommended to seek the assistance of specialists such as British Business Funding. Our professionals have the expertise to navigate the intricacies of the claiming process, ensuring that it has minimal involvement from the property owner.
The process typically involves a specialist conducting a survey and preparing a detailed report on the qualifying assets within the property. This report is then submitted to HM Revenue & Customs on behalf of the property owner to claim the embedded capital allowances. It is important to note that there are no up-front fees for this service. The fee is only due when the claim is successful, and it is typically a small percentage of the approved allowances.
How British Business Funding Can Help
British Business Funding is a trusted partner that can provide expert assistance in claiming embedded capital allowances. We specialise in identifying and maximising capital allowance claims for their clients, ensuring that they receive the maximum tax relief available. With our in-depth knowledge of legislation and expertise in property law, surveying, and valuation, we can navigate the complexities of the claiming process effectively.
By partnering with British Business Funding, business property owners can benefit from our thorough assessments of commercial properties and precise calculation of allowable capital allowances. Our team stays up-to-date with any changes or updates in the field, ensuring that clients receive accurate and reliable advice.
British Business Funding has a proven track record of helping clients claim substantial capital allowances. Through case studies, we showcase successful claims where clients have identified significant amounts of capital allowances, leading to reduced tax liabilities and increased financial benefits.
Conclusion
Embedded capital allowances are a valuable opportunity for business property owners in the UK to reduce their tax liabilities. By claiming these allowances, owners can deduct the cost of qualifying assets from their taxable profits. It is crucial to understand the process and eligibility criteria for claiming embedded capital allowances, as well as the different types of allowances available.
Partnering with British Business Funding can greatly simplify the claiming process and ensure that property owners receive the maximum tax relief available. Their expertise and knowledge in the field of capital allowances can help business owners navigate the complexities of the claiming process, ultimately leading to increased financial benefits.
Take advantage of embedded capital allowances today and explore how British Business Funding can help you unlock the tax relief you deserve. Contact our expert team to get started on your capital allowance claim and optimise your tax position.