ABSTRACT

Capital allowances provide tax relief by prescribing a statutory rate of depreciation for tax purposes in place of that used for accounting purposes. The capital allowances most commonly applicable to real estate are those given for capital expenditure on existing commercial buildings in disadvantaged areas, and plant and machinery in all buildings other than residential dwellings. The primary legislation is contained in the Capital Allowances Act 2001. The Finance Act 1994 introduced major changes to the availability of Capital Allowances on real estate. Building refurbishment projects is typically a mixture of capital costs and revenue expenses, unless the works are so extensive that they are more appropriately classified a redevelopment. Business premises renovation allowance (BPRA) is available to both individuals and companies who own or lease business property that has been unused for 12 months or more. Other types of allowances include those available for capital expenditure on Mineral Extraction, Research and Development, Know-How, Patents, Dredging and Assured Tenancy.