The new capital allowances rules for
equipment installed in buildings make
it more important than ever to classify
correctly all expenditure on construction,
refurbishment and repair of buildings.
This year’s reform of capital allowances
introduced a new 10% annual rate of writing
down allowance for specified equipment
that forms an integral feature of a building.
Some of the items previously qualified
for the 25% writing down allowance.
Other items, such as ordinary lighting and
cold water systems, did not qualify at all
because they were considered to be part
of the building itself.
Integral features are defined as electrical and
lighting systems, water, heating, ventilation
and air conditioning systems. This includes
the floors and ceilings comprised in such
systems, as well as lifts, escalators and
external solar shading. The new 10%
allowance will also be available for thermal
insulation of a building, except where it is
used for a residential property business.
Integral features qualify for the annual
investment allowance that gives 100%
tax relief for the first £50,000 a year of
expenditure on equipment. For smaller
businesses, planning the timing of
expenditure to minimise the excess over
£50,000 in any year will accelerate tax relief.
Integral features cannot be classified as
short-life assets to obtain faster relief. Other
plant and machinery in buildings, including
toilet and kitchen facilities, qualify for t
he 20% rate of writing down allowances.
The cost of repairs is normally allowable in
full. However, if in any 12-month period the
cost of repairing an integral feature is more
than 50% of the cost of replacing it in full,
the expenditure will only qualify for the 10%
relief. So if you intend to carry out repairs,
for example to a heating system, you will
need to get an estimate of the cost of full
replacement and keep a running total of
your expenditure.
We can help you maximise tax relief on
all your expenditure on buildings and
equipment. Please get in touch – ideally at
the planning stage.
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