Capital allowances and Land Remediation Relief
Capital allowances
Capital allowances for commercial properties, are potentially very valuable. Tax relief may typically be available for between 15% and 45% of the purchase price of the property. A simple office or warehouse is likely to be at the lower end, whereas a care home or upmarket hotel may be around the top of the range. The value of the allowances comes from 'fixtures' in the property. These should be identified at point of purchase in order to secure the allowance.
The technical capital allowances definition is that a fixture is "plant or machinery that is so installed or otherwise fixed in or to a building...as to become, in law, part of that building...".
Typical plant and machinery assets
- integral features:
- lifts, escalators, moving walkways, space and water heating systems, air conditioning systems, hot and cold water systems, electrical systems, external solar shading, computer/telecoms wiring and trunking, fire safety equipment/signage/emergency lighting, automatic door closures, external signage and car park barriers
- fixtures:
- fitted kitchens, bathroom suites, fire alarm systems, CCTV systems, internet cabling and telephone systems.
Who can claim?
- owners of commercial property, freeholder or leaseholder and who are paying either UK corporation or income tax
- commercial property owners are eligible to claim if they are a company, sole trader or partnership and are either carrying on a trade or a property letting business (including furnished holiday lets)
- dwelling houses do not generally qualify. Therefore, property that has been bought to rent out on a domestic basis is usually not eligible
- providing you still own the property in the tax year you submit the claim there is no time limit to making the claim. This means that even if you purchased your property in the 1990s you may still be able to claim tax relief.
For further information, consult a specialist accountant with expertise in this area. Many accountants specialising in this work act on a 'no win, no fee' basis.
Land Remediation Relief
- for expenditure after 1st April 2009 on cleaning up land acquired in a contaminated state
- Land Remediation Relief is a relief from corporation tax only (for land acquired by a company for the purposes of its trade or property rental business)
- it provides a deduction of 100% and an additional deduction of 50% for qualifying expenditure incurred by companies in cleaning up land acquired from a third party in a contaminated state.
The types of relief
- owner occupier /investor rate - 150%
- developer rate - 50% (100% build costs claimed as well)
- for loss making companies a tax credit can be claimed - 24%
Land or buildings are in a contaminated state if there is contamination present as a result of industrial activity such that:
- it is causing relevant harm, or
- there is a serious possibility that it could cause relevant harm, or
- it is causing, or there is a serious possibility that it could cause, significant pollution in the groundwater, streams, rivers or coastal waters
Relevant harm includes significant adverse impact on the health of humans or animals, or damage to buildings that has a real impact on the way the building is used.
Qualifying expenditure includes:
the cost of establishing the levels of contamination, removing the contamination or containing it so that the possibility of relevant harm is removed. There is, however, no relief if the remediation work is not carried out.
Available for the removal of contamination arising from:
- asbestos, sulphate contaminates in the soil, fuel, oil contaminates (disused oil/ diesel/petrol tanks), Japanese knotweed or any pollutants resulting from previous industrial activity on the site.
Available for both capital and revenue expenditure
Time limits for retrospective claims of land remediation relief is up to three years. For further information, please seek independent advice.