The 4 Step Guide to successfully claiming property related Capital Allowances

If you have spent capital buying, and/or improving commercial property, you may be entitled to tax relief.

Property acquisition expenditure can be divided into the proportion which is qualifying embedded fixtures and fittings (this is over and above chattels).

A breakdown of the qualifying embedded fixtures and fittings is often information which is missing from the property’s completion statement and sales agreement, and the rules governing it can be fiendishly complicated.

Property embedded fixtures and fittings of different kinds are covered by a complex web of legislation and often governed by time limits for making claims. Chris Roberts, MSC R&D’s Capital Allowance Specialist, explains: “Our focus is highlighting items that enables the building to function as a building, and not just the wall, floor and ceiling. It is items like heating systems, electrical systems and wiring, and lifts.” These also include relatively small fittings, such as door hinges, which may be easy to overlook. Door hinges, for example, can come under the category of Plant and Machinery because of their function.

Note that even if you are only renting a property, you may still be able to claim capital allowances through Leasehold Improvements that are carried out.

How the process works

Step One

MSC R&D’s specialists work with your accountant. With our support and guidance, the accountant can identify if you have spent capital buying or improving commercial property, and if you can benefit from a Property Capital Allowance Review.

It’s crucial to determine if and how you could benefit from any Capital Allowances secured on your behalf before the claim process is started,” says Chris. “Your plans are important – while you may be entitled to make a claim, this is only worth doing if you are paying tax or expecting to do so”.

It is at this stage the viability of a claim is considered by MSC R&D’s team, the accountant and you, the client, to ensure reputations and relationships are maintained.

Step Two

Once the potential for a claim has been established, the process of calculating the claim is started. The MSC R&D team will perform a site survey and take an inventory of everything in, on and around a premises. Their team of chartered accountants, tax specialists, qualified surveyors, valuers and property experts will assess each item and what kind of claim it qualifies for. “While an accountant will understand the opportunity, they quickly realise the requirement for a multitude of disciplines in order to prepare a full and accurate claim. Our reputation has been built due to having all the required disciplines needed to create a technically sound approach,” Chris Roberts says. Formulating the claim value is far from straightforward. A key component is valuing the cost to buy and install each item that is to be included in the claim. The right legislation must also be applied to each claim that is submitted.

Step Three

The claim is now applied to the client’s tax profile. The MSC R&D team will amend any previous tax returns and apply to HMRC for the relevant refund. The team will take over from the accountant in liaising with HMRC, including in the event of an enquiry. “Over the past 17 years, we have never lost a case,” Chris Roberts points out. These enquiries occasionally take place due to the large sums of tax recovered by our service.

Step Four

MSC R&D then produces a report, which shows how the figures have been calculated and includes copies of any amended tax returns. “Accountants really like the fact that they are not tasked with any part of our claim process and are kept informed throughout the process with a report for their records once completed,” says Chris Roberts. The report includes the invoice from Capital Allowance Review Service. If the team of experts find unclaimed Capital Allowances, the client will typically be charged a percentage of the secured claim, but if nothing is found, they will not be charged. Frequently, the client recovers enough tax for this to cover all fees. If this is not possible, this is raised at step one before the claim process starts. And finally… Further support is provided, so that if the client goes on to sell their property in the future, they will receive legal support and advice to ensure the remaining allowances are dealt with in a manner that best suits the client position. What kind of values are typically found? On average, 25% of a property purchase cost will have unclaimed embedded fixtures and fittings that qualify for tax relief. This can vary according to the type of property and its use. For instance, a care home may contain up to 35%, while an industrial building is likely to be at the lower end of the scale.