Capital Allowances: Tax Relief for UK Commercial Property Investors

Capital allowances are the only form of tax relief available to UK taxpayers on their commercial property-related expenditures.

Despite their long history dating back to 1878, our experience has shown that many claims are frequently overstated and as a result, taxpayers miss out on significant savings.

At Bonham & Brook, our experts have the knowledge and expertise to help you identify your full entitlement and make the most of your tax savings. Whether you are a company or an individual, we will help you navigate the complexities of capital allowances and claim eligible expenditures.




What are Capital Allowances?

Capital allowances allow taxpayers to claim plant and machinery at a rate of 12.5% over an eight-year period, while most industrial buildings can save 4% over a 25-year period.

Eligible expenditures for capital allowances include equipment used for business, costs of dismantling plant and machinery, integral features within a property, and more.


What is plant and machinery for the purposes of capital allowances?

Plant and machinery refers to individual items within a property that make the property useable and workable.

This includes trade-specific machinery, vehicles, and even fixtures like fitted kitchens and complete bathrooms. If claimed in time, these costs can be deducted in full from your profits before taxes through the Annual Investment Allowance.



what is considered plant and machinery for capital allowances?

You can only claim for integral features within a property if the purchase of those items or the property was made after 2008 and the asset is still owned today.

  • Equipment that you continue to use for your business, such as cars
  • Costs of dismantling plant and machinery
  • The components of a structure are referred to as “integral characteristics”
  • A few fixtures, including bathroom or kitchen suites, have been fitted
  • Changes to a structure to add other plants and machinery (but not repairs); Fixtures and fittings inside a building that are considered integral characteristics often have a longer lifespan and are more difficult to remove from the property.
  • Moving walkways, escalators, and elevators
  • Heaters for both space and water
  • Systems for air conditioning and cooling
  • Systems for hot and cold water (but not toilet and kitchen facilities)
  • Electrical components, such as lighting components
  • External solar protection Fixtures are pieces of equipment that have been fastened or put in a building and have now become a part of it. Fixtures may well be claimed, for instance:
  • Fitted kitchens
  • complete bathrooms
  • CCTV and fire alarm systems


What is not considered plant and machinery?

  • Leasing items, you need to buy them.
  • Items that are only used for commercial entertainment, such as a superyacht or Lunchroom TV.
  • Land
  • Structures e.g bridges, highways, docks
  • Structures, such as doors, gates, shutters, and primary water and gas systems What comprises machinery and plant?


What is eligible for Capital Allowances?

To qualify for capital allowances, a company or individual generally needs to own the asset and be liable to UK tax. Spending on the installation of equipment and the associated costs of demolishing a building that is kept as a fixed asset (as opposed to trading stock) qualifies for capital allowances.

The following is considered eligible for capital allowances:

  • Patent allowance – IP relating to industrial practises.
  • Dredging allowances – deduct capital expenses related to dredging.
  • Structures and buildings – dependant on the money you spend.
  • Plant and Machinery – Items that you continue to use in your business.
  • Renovating commercial spaces in underprivileged parts of the UK
  • Mineral extraction – carrying out a mineral extraction trade.
  • Research and development – 100% tax deductible for R&D activity costs.


Our Capital Allowances process

At Bonham & Brook, our process for claiming capital allowances involves the following steps:

  1. Eligibility: We will check for entitlement by reviewing lease, supporting documents, and agreements.
  2. Gathering Information: We will coordinate with project teams, estate agents, and finance teams to gather information.
  3. Estimation: We will prepare an estimate with in-house quantity surveyors and conduct site inspections if needed.
  4. Preparation: We will examine overall capital expenditure, create an independent report, and clarify with HMRC if necessary.


Why Us?

Our clients can be confident that we can prove fully maximised and compliant capital allowances/tax depreciation applications thanks to the number of claims we have submitted.

Since the outset, we have created a distinctive claim process that has been put through its paces by a considerable number of HMRC audits. We are unmatched in terms of expertise, claim fulfilment and negotiation experience.

The following are some areas in which our team has substantial practical experience:

  • Retail, hotels, restaurants, and other places of business.
  • A purchase agreement for either new or used property.