Opportunities to Claim

It was announced in the 2007 Budget that the system of industrial buildings allowances (IBAs) is to be phased out. The phasing-out complete in 2011 will be achieved by reducing the rate of tax relief by one-quarter each year over 4 years. If a taxpayer acquires property second-hand and is claiming over the remaining IBA life, for example, say 10% over ten years, this will reduce to 7.5%, then 5% then 2.5% then nil.

Subsequently, it is more important than ever to maximise plant and machinery allowances - for most taxpayers with commercial investments this is now the optimum tax relief and by 2011 will be the only way of obtaining any tax relief for expenditure on commercial property.

Capital Allowance

Capital allowances are a valuable form of tax relief available to anyone incurring capital expenditure buying or building commercial property. As a business you can claim tax allowances, called capital allowances, on certain purchases or investments, which means you can deduct a proportion of these costs from your taxable profits and reduce your tax bill.

Capital allowances are available when;

Capital allowances are available for two reasons:

Firstly, accounting depreciation is not an allowable deduction for tax purposes. However, capital allowances are available instead, which give a tax deduction under rules set out by Government (this is why capital allowances are sometimes called 'tax depreciation').

Secondly, because capital allowances provide valuable tax breaks, the capital allowances system is used to provide incentives to invest in commercially and economically desirable assets.

Capital allowances are a right, not a privilege and are best thought of as a reduction in the purchase price of the assets. They significantly boost the post-tax yield on an investment. In short, capital allowances are an entitlement; if you have incurred the expenditure you deserve the tax benefit.