Q: I've just come across an article about capital allowance and would like some clarification as to how the classificiation of a building affects eligibility for it.
Aug 22 2011
Answered by: Clive Lewis Ask a question
Capital allowances are reliefs allowed by HM Revenue & Customs (HMRC) as deductions from a business’ profits based on the cost of an asset. Not all assets qualify for capital allowances and the rate of allowance (or depreciation) varies. The allowances are deducted from trading profits to calculate the tax payable (Income Tax for a sole trader or partnership or corporation tax for a limited company).
Certain expenditure on a building could be classified as plant and machinery which attracts a higher rate of capital allowance than a building. So for example lifts and central heating systems are treated as plant, while basic electricity and plumbing systems are not. The rules regarding what expenditure qualifies as plant and machinery are very complex and are derived largely from case law. Very often the cost of a building attributable to the items allowable as plant and machinery is lost in the overall cost of the building. A chartered surveyor who is familiar with the rules regarding eligible expenditure can help identify the costs applicable to the allowable items. An accountant with the relevant tax knowledge can also make a claim on your behalf.
But before employing a firm to make a claim it is worth checking with your accountant that the building is a qualifying building and that no claim has already been made for the relevant applicable expenditure.
Comments [1]