Capital allowances have become a hot topic in recent years, but they are often overlooked and undervalued by commercial property owners. These owners – whether individuals or businesses – incur vast amounts of capital expenditure but are often unaware that it is possible to separate the cost of the land, bricks and mortar from the fixed plant and machinery that allow the building to function – and thus the element that qualifies for tax relief.
More confusion was created with the introduction of the fixed value and mandatory pooling requirements which have been a double-edged sword for taxpayers (see Fixed value and pooling).
The changes to legislation have generated a lot of discussion and an overall increase in awareness of capital allowances for commercial property. They are hardly rock’n’roll but at least they are now on people’s radars. Indeed, many more accountants and conveyancers now recognise the importance of working with capital allowances specialists when dealing with commercial property transactions.
However, this remains a complex area. Rather than leaving sale agreements silent on capital allowances, many include arbitrary elections for nominal amounts (typically £1 a pool).
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