Tax relief on property refurbishment or construction

DON'T FORGET THE TAX RELIEF ON PROPERTY REFURBISHMENT AND BUILDING PROPERTY

The cost of refurbishing a property or constructing a new build can be substantial. However, tax relief is often available on certain expenditure on non-residential property. The term ‘non-residential property’ includes furnished holiday lets and staff accommodation.

If you are carrying out a refurbishment project, the first question to ask is whether any of the expenditure would qualify as a repair. The repair must be a ‘like for like’ replacement of an existing asset (e.g a replacement roller door, replacement windows or replacement concrete floor etc). If this is the case, then it is likely that 100% tax relief would be available for the expenditure incurred. However, if any part of the refurbishment is an improvement as opposed to a repair then this will be treated as capital expenditure. Capital expenditure on the structure of the building (e.g walls, floors, ceilings etc) will not attract any tax relief. However, capital allowances may be available if any of the expenditure is for plant and machinery (P&M) or integral fixtures and fittings (IFF).

Annual Investment Allowance (AIA)

The AIA provides a 100% deduction for the cost of P&M or IFF up to a certain annual limit. The current limit of £200K was set with effect from 1 January 2016 and there is no indication that this will be reduced in the near future. For expenditure in excess of the AIA, then ‘writing down allowances’ are available at 18% on P&M and 8% on IFF. Therefore if you are planning a substantial building project, it would be beneficial to consider the timing of your expenditure as spanning it across two accounting years may gain full AIA relief.

Common qualifying items in a building are set out below, however, this list is not exhaustive:

• Moveable partition walls
• Storage equipment, including cold rooms
• Fire & burglar alarm systems
• Advertising signs
• Computers and CCTV systems
• Gas and sewerage system requirements
• Cookers, washing machines, refrigerator, basins, toilets etc
• Swimming pools
• Electrical systems, including wiring and lighting systems
• Ceilings/floors where they perform a function (i.e an integral part of the heating system)
• Solar panels
• Hot and cold water systems
• Space and water heating systems
• Air conditioning systems
• Lifts and escalators
• Kitchen and bathrooms fittings

Other allowances

It is also possible to claim capital allowances for expenditure on thermal insulation, roof lining, double-glazing, draught exclusion and cavity wall filling. Tax relief can be claimed on these items at 8% writing down allowance.

100% tax relief is also available on energy-saving and water-efficient plant and equipment. This tax relief is in addition to the 100% AIA limit, which is useful in a year with significant capital spend.

Examples of qualifying ‘Green’ technology items include:

• Pipe insulation
• Technologies that reduce water use or improve water quality
• White LED lighting
• Refrigeration equipment

If you have recently refurbished or built a non-residential property and do not think you have maximised your capital allowance claim, then do contact us to identify the scope and value of a potential further claim.