Capital allowances for commercial properties can provide valuable tax relief on qualifying expenditure incurred in the acquisition, construction, or refurbishment of the property. Here’s an overview of capital allowances for commercial properties:
Plant and Machinery Allowances:
Care homes typically contain various fixtures, fittings, and equipment that qualify for capital allowances as plant and machinery. This may include items such as heating and ventilation systems, lighting, fire safety equipment, kitchen fixtures, and medical equipment.
Integral Features Allowances:
Integral features of buildings, such as electrical systems, plumbing, heating, and air conditioning, may also qualify for capital allowances. These integral features are considered part of the building structure but are eligible for separate capital allowances treatment.
Capital Allowances on Construction or Refurbishment Costs:
Expenditure incurred on the construction, extension, or refurbishment of a care home property may be eligible for capital allowances on qualifying plant and machinery and integral features. This includes both direct costs (e.g., construction costs, architect fees) and indirect costs (e.g., professional fees, planning costs).
Tax Relief Rates:
Capital allowances are typically claimed at either the main rate of 18% or the special rate of 6%, depending on the type of qualifying expenditure. Integral features generally qualify for the main rate, while certain long-life assets may qualify for the special rate.
First-Year Allowances (FYAs):
Enhanced tax relief may be available for qualifying expenditure on energy-efficient and environmentally beneficial assets through first-year allowances (FYAs). Care homes investing in eligible energy-saving technologies or low-emission vehicles may benefit from accelerated tax relief in the year of purchase.
Annual Investment Allowance (AIA):
The annual investment allowance provides 100% tax relief on qualifying expenditure on plant and machinery, up to a specified annual limit. Care homes may be able to claim the AIA to offset the cost of eligible capital expenditure against taxable profits, providing immediate tax relief.
Pooling and Writing Down Allowances:
Capital allowances are typically claimed by pooling qualifying assets into capital allowance pools and claiming annual writing down allowances on the reducing balance of the pool. The writing down allowances allow care homes to claim tax relief over time on the capital expenditure incurred.
Sale or Disposal of Assets:
Care homes should consider the tax implications of selling or disposing of assets that have previously attracted capital allowances. The proceeds from the sale may impact the capital allowances claimed, and care should be taken to ensure compliance with tax rules and reporting requirements.
It’s important for care home operators to work closely with Total Care Advisory experts in specialising in property tax for care homes to ensure compliance with tax rules and maximise available tax relief through capital allowances.