Unlocking Tax Relief on Commercial Property Investments
Capital allowances are one of the most valuable and often overlooked tax reliefs available to commercial property owners in the UK. Whether you're acquiring, refurbishing, or holding commercial assets, understanding how capital allowances work could significantly reduce your tax bill and improve your overall investment return.
What Are Capital Allowances?
Capital allowances allow you to deduct the cost of certain capital expenditures from your taxable income, reducing the amount of tax your business pays. These allowances apply to qualifying capital expenditure made when buying, building, or improving commercial property.
For example, when purchasing a commercial building, a significant portion of the cost will relate to integral fixtures and fittings. These may include:
Electrical systems
Heating and ventilation systems
Fire safety equipment
Lifts and escalators
Kitchens and bathrooms
Security and alarm systems
Rather than expensing these items all at once, capital allowances enable you to claim tax relief over a period of time. This means substantial tax savings for both individuals and companies holding commercial assets.
How Do Capital Allowances Work?
When you purchase or refurbish a commercial building, many of the assets within that building qualify for capital allowances. However, these qualifying assets are often not itemised on invoices or in standard accounting records, meaning they require a detailed specialist review to identify and value them.
Claims can be made in two main ways:
1. Annual Investment Allowance (AIA): This allows 100% of qualifying expenditure (up to £1 million per year) to be deducted in the year it is incurred.
2. Writing Down Allowance (WDA): Used for costs exceeding the AIA threshold, WDAs allow businesses to claim a percentage of the remaining value each year (typically 18% or 6% depending on the asset type).
Real-World Example: A business purchases a commercial property for £1.5 million. A detailed capital allowances survey identifies that £400,000 of this value relates to qualifying plant and machinery. If claimed correctly, this could reduce taxable profits and save the business over £100,000 in Corporation Tax, depending on the business’s tax rate and structure.
Can I Claim Capital Allowances on My Commercial Assets?
If you own commercial property in the UK, you may be eligible to make a claim, regardless of whether you’re an individual, company, or partnership. Eligible scenarios include:
Purchase of new or existing commercial property
Renovations and fit-outs
Office-to-residential conversions (for retained commercial use)
Property held for investment or trading purposes
You do not need to be VAT-registered or operating in a specific sector, capital allowances apply to a wide variety of commercial properties and activities.
To qualify, the property must be used for business purposes, and the expenditure must relate to eligible plant and machinery.
What Commercial Buildings Qualify for Capital Allowances?
Capital allowances can be claimed across a wide range of commercial properties, including but not limited to:
Offices
Warehouses
Retail shops and shopping centres
Hotels and serviced accommodation
Restaurants, pubs, and cafés
Manufacturing and industrial units
Healthcare buildings (GPs, dentists, clinics)
Nurseries and educational buildings
Mixed-use developments
It’s important to note that residential properties typically do not qualify, but areas used commercially within residential developments (such as communal areas in a block of flats) may be partially eligible.
What Is a Commercial Property Capital Allowance Claim?
A capital allowance claim is a formal process where a property owner identifies and submits eligible capital expenditure to HMRC to reduce tax liabilities. The claim must be evidence-based, often requiring a specialist surveyor to perform a forensic review of the building and assess the value of qualifying assets.
The process involves:
Reviewing title documents, invoices, and lease structures
Commissioning a capital allowances survey
Preparing a compliant report that supports your tax return
Submitting the claim via your Corporation Tax return (CT600)
Liaising with HMRC if any queries arise
Even if you’ve owned your property for several years, you may still be able to make a retrospective claim. In some cases, missed claims can be carried forward indefinitely, preserving valuable tax relief.
Why Choose P10 Financial for Capital Allowance Claims?
At P10 Financial, we bring together accountants, tax specialists, and capital allowance surveyors to provide an end-to-end service that unlocks value and ensures HMRC compliance. Many accountants do not have the expertise to identify or substantiate large claims, leaving money on the table.
We ensure:
All qualifying items are identified and claimed
Claims are prepared with full documentation for HMRC
No disruption to your existing accountant or tax adviser
Compliance with current legislation and best practice
We’ve helped property investors unlock hidden tax savings ranging from £25,000 to £500,000+, depending on the property and investment scale.
Our Capital Allowance Services Include:
Property eligibility assessments
Capital allowances surveys and reports
Historical claim reviews and amendments
Partnership and SPV structure analysis
Support with acquisitions and disposals
Integration with inheritance tax and exit planning
Whether you're buying your first commercial unit or hold a multi-property investment portfolio, our approach is proactive, detailed, and tailored to your tax strategy.
