Capital allowances on property transactions

Capital allowances represent the tax relief available to businesses on their capital expenditure. In addition to allowances available on expenditure on purchasing assets and improving a business’s existing assets relief may also be available for the fixtures present in buildings bought through a property transaction.

Basics – who can claim

The first step is to consider whether the business fits the basic requirements to make a capital allowances claim. To be eligible for relief a business needs to have a qualifying activity – a trade or property business – and be acquiring an interest in the land on which the property is located. It is worth noting that the interest does not have to be freehold; leasehold interests can be sufficient but may come with some additional considerations.

When expenditure towards acquiring and improving the property is treated as revenue for example by a property developer...