What are Enhanced Capital Allowances?
Within any commercial building there may be embedded capital allowances not having been previously claimed. Any such unclaimed items can be identified by industry experts and is addressed as an additional claim made on the face of your tax return (It is not expensed through the profit and loss account). Claims can be made on:
- Plant and Machinery: Any items you keep to use in your business (i.e includes fixtures such as bathroom suites and fitted kitchens as well as the cost of installation and demolition, etc.)
- Integral Features: Parts of a building considered integral (i.e Lifts, air conditioning/cooling systems, water/electrical systems etc.)
How can LBW assist with Enhanced Capital Allowances?
- LBW liaise with specialist claims advisors in order to enhance the allowances you receive on your commercial property.
- Within 10 minutes of reviewing your claim, our experts can advise you on whether or not you could be eligible.
- Once the amount of Embedded Capital Allowance expenditure has been identified, a claim is made using the normal capital allowance rules.
Tax Relief Available
- Some of the identified additional expenditure will be eligible for Annual Investment Allowance of 100% if it has been purchased within the last 2 tax years.
- Any expenditure incurred earlier, depending on what it actually is, will be eligible to either:
- Plant and machinery writing down allowance of 18%.
- Integral features writing down allowance of 8%, if incurred after April 2008.
- In each case, the amount claimed in the year will be deducted from the residual value of the eligible expenditure. The following year, the same writing down allowance can be claimed on this new residual value.
Examples
Illustration 1
A specialist informs a company that they have £40,000 worth of wiring (integral feature) within their building and an air conditioning system (plant and machinery) valued at £80,000 which have not previously been claimed. All of the expenditure was incurred 5 years ago. Claims are made over the next 3 years:
| Year Number | Integral Feature Residual Value | Tax Relief Available | |
| 1 | £40,000 | £40,000 x 8% = £3,200 | |
| 2 | £40,000 - £3,200 = £36,800 | £36,800 x 8% = £2,944 | |
| 3 | £36,800 - £2,944 = £33,856 | £33,856 x 8% = £2,708.48 | |
| Year Number | Plant and Machinery Residual Value | Tax Relief Available | |
| 1 | £80,000 | £80,000 x 18% = £14,400 | |
| 2 | £80,000 - £14,400 = £65,600 | £65,600 x 18% = £11,808 | |
| 3 | £65,600 - £11,808 = £53,792 | £53,792 x 18% = £9,682.56 | |
Illustration 2
A company makes a profit of £50,000 and has recently acquired a commercial building. They employ a specialist, who identifies £200,000 of eligible expenditure. £100,000 of which, was purchased within the last 2 tax years and is eligible to be claimed as an AIA. £30,000 is identified as piping for the water systems of the building (integral features) and £70,000 is identified as being for the buildings bathroom and kitchen suites (plant and machinery). Below illustrates what the company claimed for the year.
| Calculation Step | Amount |
| Profit | £50,000 |
| Annual Investment Allowance | £100,000 x 100% = £100,000 |
| Integral features writing down allowance | £30,000 x 8% = £2,400 |
| Plant & machinery writing down allowance | £70,000 x 18% = £12,600 |
| Total Allowance | £100,000 + £2,400 + £12,600 = £115,000 |
| Tax Adjusted Loss | £50,000 - £115,000 = -£65,000 |
