Guest Blog: Office Refurbishment and Capital Allowances

Refurbishing your office or relocating to a new environment is a costly exercise but there are advantages to seeking advice from your contractor to implement LED lighting, low cost air con – ensuring the mechanical and electric design is correct to max the performance of the building, half flush WC systems , the list is endless,. In this guest article we hear from RIFT, a local Ashford company, expanding further on the subject of corporate tax allowances that are very often missed by clients accountants in full. Refurbishing your office? You could claim back tens of thousands from the Government. Capital Allowances are the only form of tax relief on capital expenditure incurred on commercial property and provide an effective way of reducing the ‘after tax’ cost of acquiring, building and refurbishing a property. If you’ve recently fitted out or refurbished your own commercial property, are you absolutely sure you have claimed all the tax allowances available? If you are about to rip out a commercial building and have plans to refurbish it, stop and take stock of what you have before you make any changes. The capital allowances legislation allows you to reclaim eligible items, but also to claim for the expenditure of the previous owner if they haven’t claimed – and 90% haven’t so the chances are very high. By taking time to consider capital allowances before the refurbishments are carried out, specialist surveyors can analyse the building and value the previous owner’s expenditure. Things like air conditioning, lighting, lifts and toilet facilities can be valued before they get ripped out and replaced. You can then collate the costs of your own refit and add this to the total qualifying expenditure to reduce your tax bill. For those refurbishing buildings, the capital allowances involved can be extremely lucrative. If you’re thinking about refurbishment or renovation, the return on investment is nothing to be sniffed at. The bottom line is – if you’re carrying out refurbishment works you can potentially claim up to 100% as capital allowances, depending on the nature of costs. As a corporation or personal taxpayer this can be a highly effective way of reducing your tax bill. Too often accountants and business owners miss this because the rules are highly complex. To be eligible you must be a UK corporation tax or personal taxpayer, but if you are a public body, charity or own your property through a pension fund you cannot usually benefit. As an example, a recent client bought a restaurant and we found £160,000 of unclaimed allowances by the previous owner. With his own building work added to that amount, the total capital allowances claimed (and used to reduce his tax bill) came to £280,000. Another client spent just £100,000 on a refit but claimed an additional £195,000 not previously claimed. This is not a tax dodge or aggressive tax avoidance measure; it is legislation that the government uses to encourage businesses to invest. It’s a commercial property owner’s entitlement. As well as being eligible for capital allowances, other financial benefits can be gained. Office refurbishment in particular provides a great opportunity to enhance the income and performance of an older building in most financial city centre locations. London was found to offer investors the best returns for ‘major’ refurbishment (classed as aiming to extend the life of the asset by 15-20 years), with a 9.9% return on capital expenditure in a comparison of 13 global cities. It also ranked highly in the ‘minor’ refurbishment category (aiming to extend the life of the asset by up to 5 years), with an 8.5% return on capital expenditure, second only to Madrid at 9.6%. For many cities across the UK with beautiful historic or older buildings, the desire to keep properties with character in a good location means refurbishment is an increasing trend. The fact that the returns on this work are significant is an added bonus. So whether you are buying property and need to completely renovate, or an existing owner needing to upgrade and preserve your premises, make sure you’re up to speed on the financial returns available to you.

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