Capital Allowances Frequently Asked Questions (FAQs)
At CA Select, we understand that capital allowances can seem complicated. Whether you’re a property owner, business investor, or accountant, navigating through the intricacies of tax relief and qualifying assets can be daunting. Our goal is to make the process simpler and more accessible.
Capital allowances provide businesses with the opportunity to claim tax relief on certain assets, including commercial property and equipment. In essence, they allow businesses to offset the cost of qualifying assets against their taxable income, reducing their overall tax liability. This often-overlooked opportunity can unlock significant savings for businesses — especially for property owners and investors.
If you’re wondering how capital allowances work, who qualifies, or how to make a claim, this FAQ section is here to provide the answers. Our team at CA Select specialises in helping businesses and property owners maximise their capital allowances claims, ensuring that no eligible asset is left unclaimed.
We’ve compiled answers to the most frequently asked questions below. If you don’t find the information you need or if you have more specific questions, feel free to reach out to us directly. Our experts are happy to assist you through the entire process, from identifying qualifying assets to submitting your claim.
Browse through the questions below, and if your query isn’t covered, don’t hesitate to get in touch — we’re always happy to help.
I purchased my property 10 years ago. Can I still claim Capital Allowances?
Yes.
As long as you still owned the property in the year you make the claim you are entitled to claim the Capital Allowances.
However, for property purchases after April 2012 the fixed value requirement applies and after April 2014 the pooling requirement applies.
I purchased my property April 2010 and signed s198 CAA elections. Can I still claim Capital Allowances?
Yes.
Assuming the s198 CAA 2001 elections were valid and the vendor owned the property prior to April 2008 you could still claim Capital Allowances on general electrical, lighting and cold water systems but not on those assets covered by the s198 CAA 2001 elections.
This is because under s33A CAA 2001 Capital Allowances claims on these integral features have only been available since April 2008.
I have tax losses brought forward. Should I still claim Capital Allowances?
Yes.
However, depending on your tax circumstances, it may be preferable to wait until you have utilised your tax losses before having the survey done. Please note if you wait you may lose the right to claim your first year allowances (‘FYA’) and annual investment allowances (‘AIA’).
An exception to this is if an apportionment is required prior to you selling the property – a purchaser will expect to be given details of the available Capital Allowances.
If it’s so good why has my accountant not done the exercise?
All accountants have a general understanding of Capital Allowances. However, very few possess the in-house technical, legal and surveying skills to produce a full Capital Allowances report on a commercial property.
My property is in a SIPP. Can I claim Capital Allowances?
No.
However, should you transfer the property to yourself or if it is sold by your SIPP a Capital Allowances claim can be made by the purchaser.
What is the Annual Investment Allowance (AIA)?
The AIA allows businesses to deduct the full value of qualifying plant and machinery from their profits before tax, up to a certain limit. As of now, the AIA is set at £1 million, enabling businesses to claim 100% of qualifying expenditure in the year of purchase
What are First Year Allowances?
First Year Allowances (FYA) are a type of capital allowance that allows businesses to claim a higher percentage of tax relief on qualifying assets in the year they are purchased. Unlike standard writing-down allowances, which spread relief over several years, FYA lets businesses deduct a large proportion (often 100%) of the cost from their taxable profits immediately. This accelerates tax savings and can significantly improve cash flow. FYA typically applies to specific categories of investment, such as energy-efficient equipment or assets installed in designated areas like Freeports.
It is important to check which assets qualify, as eligibility is set by the government and can change over time. Claiming First Year Allowances can form an important part of effective tax planning, particularly for businesses making major investments.
Can I claim capital allowances on leased equipment?
Generally, capital allowances are available only for assets you own. Leased equipment typically doesn’t qualify unless it’s under a hire purchase agreement or a long funding lease.
Are there specific capital allowances for energy-efficient equipment?
Yes.
The UK government offers Enhanced Capital Allowances (ECAs) for energy-efficient equipment, allowing businesses to claim 100% of the cost in the first year.
How do capital allowances affect my tax return?
Capital allowances reduce your taxable profit, thereby lowering the amount of tax you owe. They are claimed through your tax return by including the relevant deductions in the computation of your taxable profits.
Can capital allowances be claimed on property renovations?
Yes.
If the renovations involve installing or upgrading plant and machinery within the property, such as heating systems or elevators, these may qualify for capital allowances
