In the Accountancy profession the concept of Capital Allowances is well known and a thriving and exciting industry exists which obtains substantial tax relief ( often hundreds of thousands of pounds) for delighted clients. However, there will be many of you who have never heard of the topic . This is not surprising as Capital Allowances often passes under the radar and it is acknowledged within the profession that some 90% of business owners who are entitled,  have failed to make a claim or have significantly underclaimed.

So what are Capital Allowances.?  Well they date back to the 1870’s but really took hold immediately after the second world war when the government at the time looked to encourage investment in manufacturing industry by introducing this  valuable tax relief.

In very simple terms Capital Allowances are designed to allow the cost of capital expenditure on qualifying plant and machinery , to be written off against its taxable profits. Effectively they reduce the amount of tax paid by a business. The legislation is contained in the Capital Allowances Act 2001. As discussed later ‘plant and machinery’ is not our typical view of such a concept – it does not necessarily have to be working machinery- it can be a picture, a computer, bedroom furniture, cabling, air conditioning, ancillary works , ‘stripping out’ costs of old plant etc.

Are you entitled?

The following is the criteria that should be met in order to confirm entitlement:

-          the business must be paying Uk income tax.

-          The business must incur capital expenditure on the asset.

-          The asset must be owned by the business and used in carrying out the business.

-          The business must include the allowances for the asset in a tax return.

Should you make a claim? Capital allowances should be regarded as a ‘right’ and not a ‘privilege’.  They are your entitlement by law ( Capital Allowances  Act 2001)  and if you have incurred capital expenditure investing in your business you deserve the tax benefit. I suppose a good analogy is the fact that everyone one of us will claim our state pension as a matter of right. REMEMBER , claiming capital allowances is no less an entitlement.

How do you obtain the tax relief ?     Capital allowances need to be actually claimed in order to obtain the relief. A ‘return’ is submitted to the ‘Inspector of Taxes’ by such experts as ourselves. The report details the total expenditure qualifying for capital allowances and it is from this that the relevant percentages and categories of allowances are actually claimed in the accompanying tax return.

We would submit a capital allowances report on your behalf which would include a detailed breakdown of the costs and qualifying assets. Furthermore the report would include calculations and analysis explaining how the capital allowances have been calculated and provide comment on the legislative entitlement to allowances.

Why use Allied Mckeon Group Ltd?          There is certainly a case for calling in the experts. We specialise in this work and comprise Chartered Surveyors , Chartered Accountants , Tax Experts and Quantity Surveyors. We have some 30 years experience in the industry and have a very sound and deep knowledge of  over 100 years of case history and legislation. We will look further than a superficial listing of plant and machinery and uncover items of capital, embedded deeper in  the business. Uncovering this extra layer could add tens of thousands of pounds to a businesse’s total tax savings..

Remember the list of capital allowable items is vast, much of which is based on..case law. For example pictures in a restaurant may add to the ambience and hence comprise plant; Horses at a riding school would be viewed as plant; optics and glasses in a hotel may be regarded as plant depending on their durability; and although a grass football pitch would not be classified as plant,  the artificial, soft- impact surface back at the training ground would be deemed claimable as plant for capital allowance purposes. The list is indeed endless and expertise in these issues is imperative in order to maximise the claim.

Is there a time bar in which to claim?

There is no time bar on transactions pre April 2012    and it should be noted that years of unclaimed tax relief remains ‘untapped’ and is simply waiting to be reeled in. A claim started today could take into account years of investment in ‘plant and machinery’, bringing in tax savings on each and every item which may have been ‘hidden’ in previous years.

Post  April 2012 new rules have been introduced by the Finance Act 2012 ( s.43 Sch 10)  In any new transaction after this date where the seller has claimed capital allowances for fixtures, within two years of completion date , the buyer and seller will either need to:

Make a valid section 198 claim.

Or, either side can refer the matter to tax tribunal. Failure to act in this manner within 2 years of purchase and the Allowances will be lost forever.

From April 2014 ‘mandatory pooling’ will be introduced . In this case even where a seller has never claimed capital allowances before, he or she will be required to pool the expenditure within the prescribed two years of purchase. The seller will then be able to pass on the Allowances to the Purchaser. Without this arrangement the Allowances will effectively die and be lost forever leaving an irate client.

Are my interests safeguarded? The Capital Allowance industry is unregulated . However, Allied Mckeon Group Ltd is a firm of Chartered Surveyors with Chartered Accountants. Both professional bodies obviously have worldwide

recognition and both have a strict code of conduct, regulation and governance.

If I can be of any assistance then please get  in touch for a chat.

Tony Mckeon  FRICS .

Contact details - mobile: 07903229164

                        office: 01942 403378

                        email: [email protected]