Insight

A guide to capital allowances

08-Oct-2014 - Last updated on 28-Oct-2014 at 12:30 GMT

Related tags Capital allowances Property

'Capital allowances are your right and not a privilege'

Earlier this year, capital allowances specialists Catax Solutions warned that publicans need to take advantage of new legislation or risk losing millions in tax relief. MD Mark Tighe explains how licensees can ensure the money is not lost forever

What are capital allowances?
Capital allowances are a form of tax relief available to anyone who incurs capital expenditure buying, building or refurbishing commercial property. Our research shows that the UK’s commercial property owners are sitting on an estimated £1bn in this form of tax relief.

How can pub owners claim this relief?
Capital allowances can be claimed on fixtures and fittings in the building, which in pubs might include air conditioning, heating systems, pipework for pumps and barrels, lighting, security and drainage systems. For example, acting on behalf of a pub with a pur-chase price of £1,075,000, Catax Solutions uncovered a sizeable £298,099 in capital allowances.

Important changes to legislation
Since 1 April 2014, when the 2012 Finance Bill was implemented following a two-year transition period, a sizeable proportion of that unclaimed tax relief is going to be lost forever if people aren’t savvy about how to claim. Unless unclaimed capital allowances are identified and documented within two years of purchase of the commercial properties, they will be lost, for all time.

Why have capital allowances not been on the radar of pub owners?
Very few of the parties involved in commercial property transactions — the pub owners, lawyers, financial advisers and accountants — understand the new changes to the tax regime. In some cases they are not aware of it at all. The result is that a very large percentage of transactions are likely to take place this year where all unclaimed capital allowances relief is lost to both the buyer and the seller. This will carry on unless awareness of this area of tax improves.

Fundamentally, capital allowances are your right and not a privilege; if you own a pub and/or have made significant improvements to it, then you deserve the tax benefit. There’s no time like the present to investigate whether your premises qualifies for capital allowances relief.