And because this tax relief can be backdated until the year the property was purchased, there are billions of pounds of tax rebate languishing in commercial property stock.
We have discovered unused capital allowances for thousands of commercial property owners, with the average claim in the region of £140,000.
The biggest claim has been just over £10m, which gives you an idea of what’s up for grabs.
So what are capital allowances? They’re a form of tax relief available to anyone incurring capital expenditure buying, building or making adjustments to commercial property.
Examples of properties on which capital allowances can be claimed include factories and industrial units, leisure facilities, warehouses and depots, haulage yards, offices, retail stores, care homes and hotels.
So why is so little known about capital allowances?
First, HM Revenue and Customs, understandably, isn’t keen to sing this opportunity from the rooftops.
Secondly, identifying capital allowances within commercial properties is complex, so much so that even accountants only scratch the surface.
While accountants will claim on more obvious items such as shutters and curtains, fire extinguishers and carpets, generally they will not drill down to the items where the far more significant costs to a business lie.
These might include air conditioning or heating systems, lighting and security systems, plant and machinery items.
A specialist capital allowances firm, by contrast, will have a different skill set and a more detailed understanding of capital allowances law and practice than most accountants, and be able to uncover more valuable capital allowances.
For example, last year we took on a company that had purchased in 2008 a ground floor retail outlet and three-storey office block in Southport for £2m.
Having first established the property’s capital allowance history we carried out a detailed forensic survey.
We identified £498,954 of unclaimed capital allowances, which arose out of the structural constituents of the building, including heating and ventilation systems, gas, electrical and security installations.
After tax at 21%, the gross benefit for the client was £104,780, while the net benefit was £80,614.
There are two opportunities here for brokers – if they own premises they can look for unused capital allowances themselves while at the same time reach out to their client base.
Source: Mortgage Strategy