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How Can I Save Tax on Commercial Property That I Own?

The role of capital allowances is to compensate for the fact that depreciation of assets is not normally tax deductible.

Generally speaking qualifying assets have a lifespan of more than two years and do not count as part of the premises, that is to say they must be things with which rather than in which you conduct business. It is important to note that the asset(s) must be relevant to the commercial activity within the premises if it is to be claimed, for instance if you have bought premises with some irrelevant assets not used in the business, then they cannot be included in claims.

Some examples of assets that qualify,

• Large tools and machinery

• Vehicles

• Telecoms equipment

• Computing equipment

• Electrical goods

• Computer software (with more than two years useful life)

• Office equipment

• Furniture

Some less obvious assets also qualify; here are a few,

• Furnishings (curtains, carpets etc.)

• Storage and display equipment

• Sanitary ware (baths, sinks etc.)

• Fire safety equipment

• Security equipment

• Swimming pools

• Refrigeration equipment

There is no limit to the scale of the piece of capital in question; even guard dogs, oil rigs, railway locomotives and rollercoasters qualify!

The assets above have a writing down allowance of 20%; this means that every year you can claim 20% of your remaining allowance. As an example, if you claimed an allowance of £10,000 in the first year you would get £2,000, the second year you would get £1,600 and so on. This means (once again using the £10,000 example) that you could claim back almost half the allowance within three years and the whole lot within ten.

Certain other assets fall the ‘special rate pool’, this means that they qualify for the lower writing down rate of 10% (falling to 8% from the tax year commencing April 2012). These include long life assets (expected lifespan of more than twenty five years), cars with high CO2 emissions, general electrical and water systems in the premises (i.e. those not designed to service a specific piece of capital) and lifts, escalators and people movers. These, with the exceptions of the cars, are known collectively as integral features.

Therefore, even if you are aware of capital allowances and have made a claim, it is quite possible that many of the less obvious assets have been missed, especially those behind walls or under the floorboards, and there is still money to be taken off your tax bill.

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