Last edited 10 Sep 2019

Capital allowances for construction

Capital allowances can play a big part in the development of a business case for a project and in setting budgets.

The client is allowed to deduct capital allowances from taxable profits. These relate to the cost of certain assets such as:

Plant and machinery (lifts, escalators, mechanical and electrical plant, information and communications technology, equipment, furniture, fittings and office equipment).
Thermal insulation for industrial buildings.
Making certain buildings comply with the part B of the building regulations (fire safety).
Safety measures for sports grounds and stadia.
Security systems if there is a special threat to the use of the building.
Scientific research and development facilities.
Enterprise zones in relation to industrial and commercial buildings, including hotels.

The tax relief allowed relates to the reduction in value (depreciation) of the qualifying assets. The percentage of annual depreciation depends on the item claimed and the size of the business making the claim.

The percentage of annual depreciation depends on the item claimed and the size of the business making the claim. The client's finance director or in-house tax team may quantify the level of qualifying expenditure, or they may appoint a specialist capital allowances advisor. Capital allowances services are offered by specialist boutique firms, large and mid tier accountancy firms (who employ chartered surveyors) and cost consultants.

The size of the company and tax dates will affect the decision-making process and the cost consultant will have to pull out real cost data upon which annual depreciation allowances are calculated.