Commercial Property Tax
We have teamed up with Martin Wilson from Cap2 LLP to help you to successfully claim capital allowances on your commercial property investments.
Capital Allowances is a very specialist area of taxation and Martin Wilson is recognised as the UK's leading capital allowances specialist.
What are capital allowances for commercial property investors?
Capital allowances are a valuable form of tax relief available to anyone incurring capital expenditure buying or building commercial property.
They are a right, not a privilege and are best thought of as a reduction in the purchase price of the assets.
Capital allowances/related relief for property investments is available when:
Here are some instances where property investors can claim capital allowances to help significantly reduce their tax bills:
A business may operate from its own commercial property. Capital allowances are claimed on the property against taxable profits, thereby reducing the tax to be paid.
Examples of typical owner occupiers include nursing homes, pubs, hotels, offices, warehouses, industrial units, conference centres, spas, etc.
(NB accelerated allowances are available to "small" owner-occupiers. Whereas a large company can claim an allowances equal to 25% of cost in the first year and 25% of the reducing balance thereafter, a small company or business can claim 50% in the first year and a medium sized company 40%, then 25% of the reducing balance in each subsequent year).
A commercial property may be owned by an investor, but not occupied for the purposes of running their business by them (i.e. it is let to others). Capital allowances are claimed against rents, thereby reducing the tax to be paid.
Such commercial properties can include holding hotels, offices, warehouses, industrial units, retail units (for individual shops to entire shopping centres).
Property investors can claim an allowance equal to 25% of cost in the first year and then 25% of the reducing balance thereafter. There are no accelerated allowances for "small" property investors.
Property investors can be based in UK or overseas, so long as they own UK property. Overseas "non-resident landlords" will be subject to a special rate of tax at 22%.
Plant in residential property does not qualify for capital allowances, however in residential property with communal areas (ie, a large apartment block with lifts, concierge area, heating, leisure facility, underground parking, etc) a claim is possible for plant in the communal areas (but not in the apartments themselves).
Flat conversion allowances are intended to encourage urban regeneration and capital allowances are available for expenditure incurred converting the upper storeys of commercial buildings into flats.
Flat conversion allowances provide a 100% First Year Allowance (FYA) in the year the expenditure is incurred, or if it is preferred by the taxpayer, 25% per annum on a straight line basis. They are particularly valuable because they are unusually available for residential property and all expenditure incurred qualifies, unlike commercial plant & machinery allowances.
Expenditure must be incurred on the conversion, renovation, or incidental repairs of a ‘qualifying building’ into a ‘qualifying flat’.
A ‘qualifying building’ must have been built before 1980, have less than four upper storeys which were originally intended to be used for residential purposes, and all or most of its ground floor must be authorised for certain types of business use (including shops, offices, food outlets etc.).
A ‘qualifying flat’ must be in a qualifying building, not be accessed through the business part of the ground floor, have no more than four rooms (excluding kitchens, bathrooms, halls etc.), not be a ‘high value’ flat (by reference to a table of notional rents) and be suitable for and held for the purpose of short-term letting.
Developers are not entitled to capital allowances themselves on commercial property.
Land Remediation Relief
Tax relief at the rate of 150%, available to all limited company owners of land/property, where it is established there is contaminant in/on/or above the ground. (i.e. cleaning up asbestos, old petrol stations, old gas works, etc).
To see if you can benefit from claiming capital allowances, please click here to contact Martin and his team.