Tax Relief for Business Property Owners

Money, or the lack of it, is a concern for businesses at any time but during the current economic environment it takes on even greater significance. Business owners are constantly looking at ways to reduce costs without sacrificing quality or raise margins without losing customers, and even for businesses robust enough to survive the worst economic crisis on record, every pound counts.

So, mention the word tax to any business owner and the response is usually the same – a grimace on the face followed by a few negative words before an urgency to change the conversation. But, if you are a business property owner it could have positive connotations because you may qualify for a Capital Allowance Tax Break.

This is an area that is often overlooked by many business property owners either because they don’t know it exists or they think it is too complex and time consuming to pursue. Let’s take a look and find out more about this excellent opportunity.

What is Capital Allowances Tax Relief?

This enables owners to claim a tax relief on a percentage of the purchase price of a business property that relates to its ‘embedded fixtures’ such as heating, electrical and ventilation systems, carpets, bathrooms, kitchens, alarm systems, drainage and so much more.

When you make a claim for capital allowances on a business property purchase considerable tax repayments and future tax savings can be accomplished, which is great news for any business owner.

Although many of the country’s leading businesses do claim for this relief, the alarming fact is that only 15% of independent businesses and sole traders have actually made capital allowance claims for embedded fixtures, thereby making it one of the most unclaimed tax reliefs in the UK.

The process is quite complicated and because when you buy a commercial property the purchase price is not broken down to include a percentage for embedded fixtures it requires the skills of surveyors and the experience of a specialist capital allowance firm to undertake.

Who can claim?

To be eligible to claim you must be an owner of commercial freehold or leasehold property purchased before 01 April 2014 for more than £150,000 and either paying UK corporation tax or UK income tax. Additionally, you need to be either a sole trader, partnership or company and are trading from that property. There is no time bar so even if you bought the property 20 years ago you can still apply as long as you still own the property and the fixtures in the tax year you file your claim. If you bought your business property after 01 April 2014 you may still be able to claim but it does complicate matters.

The types of businesses that qualify are endless but examples include call centres, hotels, offices, shops, garages, warehouses, hairdressers, restaurants, and pubs to name just a few.

How much can I claim and what can I claim for?

In the majority of cases business property owners can claim capital allowances on a proportion of the purchase price of the property and this will vary depending on the type of building and its use. For example; the proportion of the purchase price that would qualify for a capital allowance claim can be 10% to 30% for industrial units, 15% to 35% for offices and 20% to 45 % for hotels and guest houses. However, not all commercial properties will qualify.

There is a wide range of items that you can claim capital allowances for, including ventilation systems, underground pipework, air-conditioning, electrical and lighting systems, kitchens and bathrooms, fire alarms and security, locks, handles and much more.

It’s a wonderful feeling to find out that you are about to come into some unexpected but much needed money and for some reason it is even sweeter when it comes from HMRC. To find out whether your business property qualifies you can speak with one of our Tax experts by clicking here.