Capital Allowances Explained
Capital Allowances allow commercial property owners to claim significant tax relief on embedded fixtures and fittings within a building, such as HVAC systems and wiring.
Capital Allowances are a highly valuable but often overlooked form of tax relief available to owners of commercial property (and Furnished Holiday Lets). While you cannot claim tax relief on the cost of the land or the brick structure itself, you can claim relief on the 'plant and machinery' embedded within the building.
This includes items like heating and cooling systems (HVAC), electrical wiring, lighting, sanitary ware, and security systems. When an investor buys a commercial building, a specialist surveyor can identify these embedded fixtures and assign a value to them.
Tax Savings
The value of these fixtures can then be deducted from the property owner's taxable profits. In some cases, the Capital Allowances can equal 20% to 30% of the entire purchase price of the building, effectively wiping out the investor's tax bill for several years.