CAS - FAQs
Navigating the complexities of business expenses and tax reliefs can be challenging, especially when it comes to capital allowances. These allowances are crucial for reducing taxable profits by claiming tax relief on certain investments and purchases, but understanding the intricate rules and regulations can be daunting.
To simplify this process, we’ve compiled a comprehensive list of Frequently Asked Questions (FAQs) about capital allowance claims in the UK. This guide is designed to provide clear, concise, and accessible information to help you make the most of the available tax benefits.
Whether you are a seasoned business owner, a financial manager, or new to handling business finances, these FAQs will offer valuable insights.
Capital Allowances are a tax relief available to taxpaying entities to incentivise capital expenditure. This tax relief allows capital allowances to be claimed before calculating a taxable profit which can in some cases generate a tax refund if the business is loss making.
Most businesses in the UK, including sole traders, partnerships, and limited companies, are eligible to claim capital allowances on qualifying expenditure, as long as they are within the scope of UK Income Tax or UK Corporation Tax. In order to claim Capital Allowances, you must operate a qualifying activity such as a trade, UK property business and a UK furnished holiday letting business.
Capital expenditure that typically qualifies for capital allowances at varying levels of relief includes machinery, equipment, fixtures and fittings, motor vehicles, integral features embedded within buildings (e.g., lighting, heating, ventilation, and air-conditioning systems), and structural works such as the construction of internal walls, floors, and ceilings.
Some capital expenditure is specifically excluded from the Capital Allowances legislation including residential properties, land, and intangibles such as trademarks and goodwill.
Capital Allowances are claimed in your annual tax return whether this be your CT600 return (for registered companies, your SA800 return for Partnerships, or your SA100/SA200 for individuals. A capital allowances report prepared by CAS can be submitted alongside your tax return to quantify the allowances claimed.
As you claim capital allowances in your annual tax return, the filing deadline for CT600 tax returns is 12 months after the end of the accounting period, and for Partnerships and Sole traders, the self-assessment tax returns are due on the 31st January after the financial year in which the expenditure has been incurred. Following the initial filing deadline, we have a further 12 months to amend and refile tax returns if required.
As long as the asset is still owned there is no limit as to how far back, we can review as we will be able to complete a historic capital allowances review and begin to claim these allowances in the current tax return. However, missing the filing deadline may result in losing out on potential first year allowances and utilisation of the Annual Investment Allowance.
The amount you can claim in capital allowances depends on the type and amount of capital expenditure incurred. There are varying different rates of capital allowances relief each with different rules and requirements. It’s essential to consult with CAS to determine the specific allowances applicable to your expenditure.
Yes, you can claim capital allowances on property renovations and improvements. However, the rules for claiming allowances on property are complex and may require a detailed assessment by CAS.
Yes, you can claim capital allowances on second-hand assets you acquire for your business. The amount you can claim may be based on the original cost to the previous owner, and there are specific rules for claiming on used assets. However, second hand assets have been specifically excluded from first year allowances such as the 130% Super Deduction, 50% Special Rate Allowance, and Full Expensing legislation.
To support your capital allowances claim, you should maintain proper records of all relevant expenditure, invoices, and documentation related to the assets. Accurate records are essential to substantiate your claims in case of a tax audit.
