Investment Property Capital Allowances; Learn how to determine if the investment property you plan to purchase qualifies for capital allowances. This guide explains different types of capital allowances and how they can help reduce your tax liability.
What Are Capital Allowances?
Capital allowances allow property owners to reclaim certain expenses associated with their investment property against their taxable income. These allowances are particularly valuable for investors as they can significantly reduce overall tax liability.
Types of Eligible Expenditure
Below are some key types of expenditure on investment properties that may qualify for capital allowances:
1. Flat Conversion Allowance (FCA)
This allowance is designed to encourage the conversion of unused spaces above commercial premises into residential flats.
What It Covers: Costs associated with flat conversion, renovation, or accessibility improvements above investment properties.
Relief Rate: 100% of eligible expenditure.
Eligibility: The property must have been previously used for business purposes.
2. Business Premises Renovation Allowance (BPRA)
This scheme supports the regeneration of unused investment properties in designated disadvantaged areas.
What It Covers: Costs for renovating or bringing unused properties back into business use.
Relief Rate: 100% of eligible expenditure.
Eligibility: Check if your property is located in a qualifying area through official government resources.
3. Integral Features Allowance (IFA)
Expenditure on integral features within investment properties may also qualify for capital allowances.
What It Covers: Essential building features, such as:
Electrical systems.
Lifts and escalators.
Air conditioning and ventilation systems.
Cold water and plumbing systems.
Relief Rate: Writing-down allowances at the special rate pool rate (10%).
Exclusions: Properties used solely as dwelling houses are not eligible for this allowance.
How to Claim Capital Allowances
Reclaiming capital allowances requires a detailed understanding of the relevant rules and accurate record-keeping. Consider the following steps:
Review Eligible Expenses: Work with a tax professional to identify qualifying costs.
Submit a Claim: Include your capital allowance claim in your company’s tax return or self-assessment tax return.
Consult Experts: Some types of claims, like integral features allowances, may require a surveyor or specialist to accurately assess qualifying expenditure.
Why Seek Professional Advice?
Capital allowances can be complex, and eligibility criteria may vary depending on your property type and location. Seeking advice from a professional tax adviser ensures:
Accurate identification of eligible expenses.
Compliance with the latest HMRC regulations.
Optimisation of your tax savings.
Important Considerations
Property Type: Capital allowances generally do not apply to properties used solely as residential homes.
Documentation: Keep records of all expenses and supporting evidence for your claim.
Changes in Regulations: Tax laws are subject to change, so stay updated or consult a professional.
The Content above is for guidance purpose only. While we make every effort to keep the information current and correct, we do not make representations of any kind. Professional advice should be sought, before entering into any legal contract and purchasing a property.
Please enter your username or email address. You will receive a link to create a new password via email.
Manage Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
