Great office design that meets the needs of your people has so many benefits, but did you know a shiny new office fit out can save you some tax too?
For this blog, we’ve teamed up with local fit out and refurbishment experts; Source One Consulting, to discuss how you can get tax reductions on your office refit.
Expenditure on property is one of the most important areas in which capital allowances need to be carefully considered. Typically, 40% of expenditure on new office builds can qualify for capital allowances, increasing to 80% for office refurbishments and 95% for retail and leisure fit-outs. However, many businesses leave much of their capital allowances or other tax reliefs unclaimed.
What is ‘Capital Allowance’?
Put simply, a capital allowance is an expenditure that a UK business can claim against its taxable profit.
How do you claim Capital Allowance?
You can claim capital allowances when you buy assets that you keep to use in your business, for example: Equipment such as printers and computers, machinery and business vehicles such as cars, vans or lorries – These are known as plant and machinery.
You can also claim capital allowances for:
- Research and development
- Structure and buildings
- ‘Know-how’ (intellectual property about industrial techniques)
- Extracting minerals
What many people don’t know is businesses can also claim on items called fixtures and fittings when renovating business premises – qualifying items include items like air conditioning, surfaces, heating systems and more!
These qualifying items can be included within lump sum costs for substructure works so considering costs and obtaining detailed breakdowns from contractors can be essential to maximise your claim.
What about the savings?
To figure out exactly what you can save, we first need to think about Annual Investment Allowance (AIA). AIA is basically an investment allowance provided to every business each year. The current AIA is at £1m and it will remain within this amount at least until January 2022.
If the expenditure on qualifying items doesn’t exceed the AIA then the entire investment can be deducted from your profits, before calculating the tax.
What if grants have been used to fund expenditure?
Unfortunately, tax relief is only available on the actual cost to the company. So where a grant has been used to fund a purchase, only the net amount (i.e. cost minus the grant amount) is available for tax relief.
What about Super-Deduction?
The new tax break everybody was hoping for, Super-Deduction, has finally taken place and it’s always good to check how it can be applied to your business.
Super-Deduction is a relief scheme designed for assets purchase in the timeframe from April 2021 to March 2023. It’s important to mention that Super-Deduction can only be used for buying new assets, as opposed to the AIA that allows second hand purchases.
If you use the Super-Deduction, it would increase the benefit of the AIA to 130% on some assets and reduce it to 50% on others. This is why planning all of this in advance and discussing available options is so important…
The importance of planning your project
The most important factor is to plan in detail and design the structure of your capital allowances tax before you start the process of renovation. Write down what you want to do, carefully go through all of the components. Make sure that all of the appropriate documentation, as well as invoices, are available for the claim of the tax relief. Get advice from your accountant early in the process. This can significantly improve the results of your claim.
Whether you are just thinking of brightening up your office, reducing office noise, replacing furniture or fitting out a new premises, we recommend you get in touch with the at Source One Consulting to find out how they can make it happen.
Since 2002 their fantastic team has been working with businesses across the UK on fit-out and refurbishment projects of all sizes and budgets. You can then rest assured that your Capital Allowance Claim is in safe hands with the Abbeygate Accountancy team.