Capital allowances

Question 1

What are capital allowances?

Answer 1

Tax relief on capital allowances

Question 2

What is capital expenditure?

Answer 2

Expenditure on assets employed in a business

Question 3

What is revenue expenditure?

Answer 3

Expenditure on repair and maintenance, wages, salaries, rent

Question 4

What tax relief do you get on revenue expenditure?

Answer 4

Generally 100% tax relief

Question 5

What conditions must be met to claim tax relief on revenue expenditure?

Answer 5

• Must be a like for like replacement
• CAN be a modern improvement
• CANNOT be an improvement
• Includes installation and consequential costs e.g. lift shaft alterations as well as lift

Question 6

Who can claim capital allowances?

Answer 6

• UK tax payers
• Expenditure on qualifying items
• Client has an interest in the property – free hold, lease hold, license to occupy etc
• Items used in for the purposes of the trade

Question 7

What types of construction work do they apply to?

Answer 7

a) Development of a new property
b) Refurbishment / alteration to an existing property
c) Fitting out work
d) Purchase of an existing property
e) Apply to commercial properties NOT residential

Question 8

What benefits do they bring?

Answer 8

• Reduce the client’s corporation tax – by reducing the level of taxable profits
• They can reduce the real cost of commercial buildings by up to 10%

Question 9

What is the current level of corporation tax?

Answer 9

19%

Question 10

What different types of allowance are there?

Answer 10

a) Plant and machinery
b) Integral features
c) Enhanced
d) Industrial and hotel buildings
e) Flat conversion