Capital allowances on domestic dwellings are not available, however capital allowances can be claimed in respect of common areas within blocks of flats and apartments. Generally, these are only available to Landlords and can be claimed on the following types of expenditure;
Acquisition of second hand property
Acquisition from Developer
New build expenditure including refurbishments
Freehold investments
Common types of qualifying residential property include; Build to Rent (BTR), Private Rented Sector (PRS) and Purpose Built Student Accommodation (PBSA).
Typical qualifying assets contained within common areas include; Lifts, Power and Lighting, Cold Water, Fire alarms and Security Systems.
How much can be claimed?
The level of capital allowances will depend upon the nature of expenditure and level of specification however typical benchmarks are as follows;
Type of Expenditure
Level of Qualifying Expenditure
Acquisition of second hand property (unrestricted)
10% - 20%
Acquisition of second hand property (restricted)
2% - 10%
New Build
15% - 25%
How we can help?
Acquisitions
Provide early advice at heads of terms to ensure the Buyers position is protected, including liaising with the legal and transaction teams to provide appropriate wording within the heads of terms and purchase contract
Carry out initial review and due diligence to conclude entitlement and restrictions in accordance with the Capital Allowances Act 2001
Liaise with Developer to obtain relevant project/cost information for Structures and Buildings allowances purposes (PBSA only)
Survey and prepare fully disclosed capital allowances reports for submission to HMRC
Liaise with client accountant and tax advisors throughout process
New Build Expenditure
Provide early advice to project team including tender wording and capital allowances strategic and planning advice. This will include ensuring the appropriate cost breakdowns for common areas are provided in a tax efficient format.
Survey and prepare fully disclosed capital allowances reports including identifying repairs, plant and machinery allowances, Structures and Buildings Allowances and Land Remediation Expenditure
Liaise with client accountant and tax advisors to ensure the capital allowances identified reconcile to the client accounts
£40m Private Rented Sector development of 211 units by property fund. Early specialist involvement with project team enabled all detailed cost information to be gathered and in depth understanding of project for capital allowances purposes. £8.4m (21%) of capital allowances identified across two phases.
£40m acquisition, capital allowances restricted by £2 election with former owner. Early pre-transaction advice to ensure 'Pooling' wording included within documentation. Detailed review and survey undertaken. Additional capital allowances of £8m identified
We prepare fully disclosed capital allowances reports for both property acquisitions and enhancement projects.
Strategic advice
We provide strategic advice throughout the property cycle including s198 elections, contributions and land remediation relief.
Due diligence
We liaise with the client and their advisors to ensure that the capital allowances position is protected during the acquisition, disposal and leasing of property.
Initial reviews
We offer a free initial review to establish if a capital allowances opportunity exists. This review is carried out with minimal time and disruption to the client.
Negotiation with the tax authorities
We apply an enquiry mitigation strategy to all of our client work. Our experience and extensive knowledge of tax legislation and case law enables us to assist with potential HMRC enquiries.
