Capital Allowance for Commercial Properties

Business investors, individuals and corporate firms who own or are in occupation of commercial premises or properties, who end up incurring a capital expenditure while buying such premises or other business items and assets are entitled to capital allowances which are normally in form of a tax relieve. Most investors, business owners and commercial property owners in the United Kingdom are entitled to this tax relief or capital allowances as a right rather than a privilege, which allowances at times are also given in form of reduction in the purchase of properties and assets, especially on the properties or items that have already attracted the capital allowance for the first time.

Capital allowances for commercial properties are normally claimed on commercial premises or properties owned by individuals, businesses or corporate investors. It is however reportedly said, ‘while many businesses and investors are aware that they can offset costs of plant and machinery bought for the purpose of work, only a few benefit by realizing that they can claim capital allowances on the commercial properties that they own’. When they do, they get up to 25% capital allowances for their premises, and they can use this to offset the costs incurred in buying machinery and other assets as aforesaid.

capitalA business or an individual can claim capital allowances on such items as cars, machines, computers, furniture, equipments and all such other items or assets used in the business. Capital allowances can also be claimed on commercial properties that are acquired for investment or occupation, on commercial new-buildings; expansion of an already existing business premises, additional of fittings, improvement on commercial premises through renovation or refurbishment and such other incurred expenditure in the commercial properties.

The capital allowances normally claimed on properties helps to reduce the tax normally to be paid on the premises or property, for owners or occupants who are using the commercial property for business purposes. For commercial properties that are not used or occupied for business purposes or for the purposes of running a business, capital allowances are claimed against the rent paid, which in return reduces the payable tax.

Once capital allowance has been claimed over a commercial premise the first time, a further capital allowance can be claimed when the property has been re-developed, new items acquired or an addition property acquired by form of expansion and other items and machinery added to the business. Basically, anything done that will incur and expenditure to the business in boosting or otherwise can attract a capital allowance claim, but only on the new items. This is true, unlike the misconception that is normally taken that once a claim has been made on a property that there cannot be done another claim at all to that particular property or premises.

Capital allowances are normally rated annually, by either reducing or extending the rates depending on the chargeable period which can either be longer or shorter than one year. On the other hand, the capital allowances for properties rate is applied on straight line basis for all commercial or industrial buildings and on a reducing balance basis for business assets.

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