In this case study, we helped one of our clients make a very significant corporation tax saving of £50k, along with subsequent yearly savings, by supporting them with a capital allowance claim.
This allows them to free up substantial amounts of money in order to support their future business goals, and improve their yearly profits for the foreseeable future.
The problem
A Yorkshire-based manufacturing business that provides assistance to their clients with manufacturing projects, right through from the design phase to completing the end products outgrew their existing premises.
The company moved to a new building, which they purchased from a developer, who fitted it out to meet their specifications.
However, during the acquisition of the building there was no consideration for any tax relief and the business owner did not anticipate there would be any scope to save on tax once the building had been purchased. The business owner approached Ascentis with a view to explore any opportunities of tax saving or advice.
Solution
Upon speaking with Ascentis, we advised that they were in fact still eligible to claim capital allowance, which could support them in making significant savings, despite the fact they had already moved premises.
Making sure that our clients are well-informed is a key value of ours, to help business leaders have full financial mastery within their organisation.
What is Capital Allowance?
Capital allowance is a type of tax relief on capital expenditure when purchasing business assets.
In the case of this client, we advised that they were most likely to be eligible for allowance in the area of “integral features” which essentially allows the purchaser in circumstances such as these to obtain tax relief on essential items such as:
- air conditioning systems, cold water systems, hot water supplies, gas systems (if part of a space or water heating system) and central heating systems (including boilers, radiators, etc.)
- burglar alarms, fire alarms systems; sprinklers & other equipment for extinguishing or containing fires
- carpets, furniture (fitted), lighting systems, shelving
- cupboards and any fitted kitchens or bathroom suites including white goods within these
- display equipment
- electrical installations
- partitions, but only if moveable and intended to be moved
- lifts (but excluding the cost of the lift shaft which cannot be claimed)
- external solar shading
- floor strengthening required to accommodate heavy machinery
Having completed the construction and sale of the building the developer was unwilling to supply a bill of quantities showing a cost breakdown of the items contained within the building.
Ascentis therefore worked alongside a Quantity Surveyor in order to obtain valuations of all of the above items in the building so the costs could be assigned to quantify the claim.
The cost of the building when purchased was £1m and it was identified the cost of the items qualifying for capital allowances came to £265k. With this information, we could then support the business in making the capital allowance claim.
Value Impact
The capital allowance claim generated a corporation tax saving of £50k in the first accounting period in which it was submitted, and subsequent claims for annual structures and buildings allowance have generated smaller savings of £5k per year.
These substantial savings could put the business in a strong position to look to the future and take steps towards achieving their future goals. And, with the regular smaller savings each year, this provides more stability to the business too.