How do I make a claim for capital allowances?
You make a claim in your tax return, usually 12 months after the 31 January filing deadline for the return. However, providing you still own the property and the fixtures in the tax year you submit a claim, there is no time limit to make a capital allowances claim.
For successful claims, allowances are normally given as a deduction in calculating your trading profits or the profits of a property letting business. This means businesses can benefit from cash flow as a deduction against corporation or income tax where expenditure has been outlaid.
We can advise on your specific circumstances, and compile your submission to HMRC on your behalf.
What is the checking process?
Capital allowances are a Government incentive for investment. HMRC has responsibility for checking capital allowance claims, but in reality, this is a struggle due to lack of resources.
To tackle abuse of the allowance, legislation has been introduced but this, combined with a substantial body of case law, has made the rules more complex for businesses, meaning professional advice has become important in avoiding missed opportunities and maximising relief.
I operate on a cash basis – can I claim capital allowances?
If you use the cash basis to calculate your trading profit, capital allowances are generally not relevant as expenditure on items such as machinery, computers and vans is simply deducted as an expense. However, capital allowances may still be relevant when it comes to cars. We can advise based on your specific circumstances.
What are the types of capital allowance?
The main types of capital allowance are:
• Initial allowance (IA)
• Annual investment allowance (AIA)
• First-year allowance (FYA)
• Writing down allowance (WDA)
• Balancing allowance
Correctly categorising items will ensure you comply with stringent HMRC regulations and maximise the amount of tax relief you can claim.
For example, the Annual Investment Allowance (AIA) enables companies to obtain 100% relief for expenditure that qualifies for capital allowances of up to £200,000. Additional and substantial relief may also be available for certain energy saving or environmentally beneficial assets through enhanced capital allowances.