Capital write-offs: HMRC’s big gift to small businesses


While many businesses claim capital deductions on items such as computers, phones and cars, they could miss out on substantial tax relief available to them in claims on other items. of plant and machinery ”which are incorporated into their commercial property.

When added up, the tax relief savings on plant and machinery claims are often more than 30 percent of the purchase or construction price of the property in which they are located.

Most commentators agree that over 90 percent of commercial properties in the UK have unused debt. Overall, the potential savings from tax breaks can be huge and are likely to be available to a large number of businesses.

Let’s look at “the factory and the machines” in a little more detail. “Machines” is fairly self-explanatory and covers the mechanical elements used by the business. The “plant” elements, however, are a little more interesting and often much less clear.

Simply put, the plant items that can generate tax breaks are devices used to run a business ?. Items such as fans, generators and heaters generally fall into this category, but the complex web of rules and case law that make up the depreciation regime means that the definition is by no means exhaustive.

The articles on which people have asked for tax relief are varied, sometimes unusual and often surprising; examples include mirrors, aquariums, statues, CCTV systems, zoo cages, and works of art. A person even tried to claim on horseback !?

SMEs often own shops, hotels, factories and offices, all of which are great examples of properties with a large amount of facilities and machinery. If your business looks like this, there’s a good chance you could qualify for a big tax break.

It is not surprising that the subscription rate of SMEs has so far been so low: the large accounting and law firms are well aware of these depreciation and have developed specialized service lines through which they regularly claim international customers. However, small businesses don’t have access to the same expertise, which is a shame, as around £ 50,000 claimed in tax relief through capital deductions can make a much bigger difference to a company’s margins and fortunes. SME that it can for the tastes. from Tesco.

Claims on installations and machinery purchased with a building can only be made once in the lifetime of that building. As briefly mentioned above, full claims have yet to be filed on over 90% of UK commercial property, but other avenues exist for those whose buildings have already been the subject of claims for capital cost allowance.

Few people realize, for example, that a portion of the money spent on maintenance, renovations, conversions, expansions and new installations can also be deducted from your business profits to reduce your tax bill.

Capital expenditures for design, project management or cost control or for specialized costs of installing a specific part of a plant or machine can all be considered for depreciation deductions. ; it is not just the cost of the item itself that is eligible. This is not widely known but represents an additional source of valuable tax relief for SMEs.

Companies wishing to maximize the relief to which they are entitled should keep detailed records of construction work on these projects and receipts for paid services that more specifically detail the work involved.

It is advisable to act quickly for SMEs that wish to take full advantage of capital deductions, as legislation that came into effect this month has effectively introduced a deadline for making claims.

While the expense of identifying, recording and claiming these allowances may seem like a hurdle, the tax relief that can be clawed back is often well worth it. As an example, an expense of £ 100,000 for a hotel can typically generate £ 35,000 in tax relief. These bonuses are HMRC’s big gift to small businesses, and they are here to be claimed.

Jeanette Edmiston is Technical Manager at Portal Tax Claims.

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