Capital Allowances on UK Commercial Property
Up to 45% of your property’s cost could qualify for tax relief.
Chartered Quantity Surveyors • 100% compliance record over 10+ years • Performance-based fees
About Commercial Capital Allowances
Capital allowances are often buried in your building’s mechanical, electrical and structural fabric, they don’t show in your accounts, and it takes a qualified site inspection to find them.
Our surveyors separate the embedded plant and machinery (Embedded Capital Allowances) from the structural fabric (Structures & Buildings Allowance) and value each. On a £1m property, that could be up to £450,000 of qualifying plant and machinery.
Does Your Commercial Property Qualify?
1. You own or occupy a commercial property
2. You’ve purchased, built or refurbished it
3. You haven’t had a specialist capital allowances survey
Embedded Capital Allowances (ECA)
Embedded capital allowances cover the plant and machinery built into your building’s fabric – the mechanical and electrical systems that make it function, not the structure itself. A specialist review typically identifies 15–45% of a property’s cost as qualifying, depending on building type (15–20% for industrial and warehouse, up to 30–45% for care homes, hospitals and hotels).
To claim:
- Your business owns or occupies the property and uses the fixtures for its trade.
- Capital spend on qualifying fixtures, not routine maintenance; in use at your accounting period end (mixed use apportioned).
- On a second-hand purchase, a CAA 2001 s.198/s.199 fixtures election within two years of completion; owner-occupiers claiming historic spend face no time limit.
Qualifying Expenditure Examples
Mechanical and electrical systems
HVAC, cold and hot water systems, electrical distribution, emergency lighting, fire alarm networks, gas installations, boiler plant, and the structural builders’ work required to install them.
Building infrastructure
Lifts, escalators, raised access floors, CCTV and security systems, ironmongery, and thermal insulation added to existing buildings.
Specialist fit-out
Commercial kitchen extraction, data cabling infrastructure and renewable energy systems, energy-efficient lighting, and a proportionate element of contractor preliminaries and professional fees.
Structures and Buildings Allowance (SBA)
The Structures and Buildings Allowance covers the structural fabric – construction, conversion and improvement costs outside the scope of plant and machinery – at a flat 3% a year over 33⅓ years.
To claim:
- Capital spend on the construction or conversion of a commercial, non-residential building used for your business.
- All construction contracts signed on or after 29 October 2018.
- Relief starts from the building’s first non-residential use; unused allowances carry forward indefinitely.
Qualifying Expenditure Examples
New construction
Build costs, structural works, foundations, drainage, external works, site preparation and enabling works directly related to the building.
Renovation and conversion
Fit-out works, conversion to a new qualifying use, renovation, replacement of structural elements, and capital repair works carried out as part of a renovation or conversion.
Professional and design fees
Architect, surveyor and design fees, planning and project management costs, where directly attributable to qualifying construction or renovation and the works are actually carried out.
Working With Accountants
Our property surveys and cost segregation work complement, rather than duplicate, your accountant’s services.
- We deliver: The physical site survey, forensic valuation and a full HMRC-ready report.
- Your accountant delivers: The actual capital allowances claim on your tax return, using our data.
We partner with accounting firms on a referral basis, allowing practices to offer specialist capital allowances expertise to clients without building the capability in-house.
| Accountant | Chartered Quantity Surveyor (QS) | |
|---|---|---|
| Role | The accountant files your capital allowances claim. Works from your financial records to identify what qualifies and ensures it reaches your tax return. | Carries out a cost segregation exercise on your property spend, finding and valuing qualifying items that don’t appear in the accounts. Hands the figures to your accountant to claim. |
| Plant & Machinery Allowance | Plant and machinery assets already separately recorded in your accounts:
● Machinery and equipment on separate invoices If it isn’t broken out in your records, it can’t be claimed. | Everything embedded in your building (it’s integral features), invoiced separately or not:
● Electrical installations and distribution These almost never appear as separate line items, but they qualify. |
| Structures & Buildings Allowances | Claims SBA on your recorded construction or purchase cost:
● Original build contract or developer’s certificate | A QS establishes the base cost by:
● Removing all qualifying plant and machinery (including integral features) from the total build cost Claiming SBA on the full build cost without removing plant is one of the most common mistakes in property tax. |
| Typical quantum | Captures what is already visible. On most properties, that is a fraction of what genuinely qualifies. | Cost segregation with P&M typically identifies up to 45% of total property cost as qualifying. On a £1m building, that is £400,000 in allowances, most of which would never appear in the accounts without a QS. |
FAQs
I’m about to buy a commercial property - what should I do?
Raise capital allowances before you exchange, ideally at heads of terms.
- For fixtures, the value is fixed between buyer and seller through a Section 198 election within two years of completion.
- For the Structures & Buildings Allowance, you’ll need the seller to pass on a valid allowance statement.
Getting both onto the agenda early protects your entitlement.
Can I claim if I lease the property rather than own it?
Often, yes. If you’ve incurred capital expenditure on qualifying fixtures (for example, on a fit-out or refurbishment) you may be able to claim even as a tenant. For the Structures & Buildings Allowance, a lease of 35 years or more is generally required.
Can I still benefit if my business is loss-making or pays little tax?
Yes. Capital allowances reduce taxable profits, and any unused allowances increase losses that carry forward to set against future profits. The benefit isn’t lost, it’s available when your position improves.
Can I still claim if a previous owner already claimed on the building?
Possibly, but it depends on how the fixtures were dealt with at purchase. Where a past owner pooled and claimed, the value fixed in the Section 198 election governs what’s available to you. We review the history as part of establishing what can be claimed.
Will claiming capital allowances increase my Capital Gains Tax when I sell?
No. Under Section 41 TCGA 1992, capital allowances are not deducted from the property’s cost for capital gains purposes, so a claim cannot create or increase a chargeable gain. This is a common misconception – claiming doesn’t reduce your base cost when you come to sell.
Will claiming affect my accounts or balance sheet?
No. Capital allowances are a tax computation adjustment, they reduce your taxable profit without changing the accounting value of your property or how it’s recorded in your accounts.
What does a capital allowances claim cost?
Our service operates on a performance-based fee, invoiced only once you’ve received your benefit. Every claim includes professional indemnity cover, and we begin with a free preliminary desktop review – so you can establish whether a claim is worth pursuing before committing to anything.
How long does the process take?
It depends on the property and how readily the purchase and construction information is available. Once we have what we need, we arrange the site survey and prepare your report; we’ll give you a realistic timeline at the desktop review stage so you know what to expect.
Could claiming capital allowances lead to an HMRC enquiry?
A properly prepared claim is supported by detailed schedules and valuations, cross-referenced to the relevant legislation and HMRC guidance. We hold that evidence ready, and if HMRC does raise questions, our team provides full support throughout at no additional cost.