Capital allowances on commercial property remain one of the most technically complex areas of UK tax.

For accountants advising clients with property exposure, understanding where challenges arise is critical, both from a compliance and professional risk perspective.

Why Capital Allowances Are Complex 

Capital allowances claims often involve:

• Large figures
• Complex apportionment
• Interpretation of “plant and machinery”
• Interaction with legal elections
• Historical entitlement issues
• Requirement of additional documents, such as specialist reports to be submitted alongside company returns or self-assessment, depending on how the property is owned. 

Errors in preparation can stem from misunderstanding the boundary between:

• Building fabric (non-qualifying) 
• Integral features (special rate) 
• Main pool plant and machinery 
• Repairs vs capital expenditure  

Below we list the areas we assist in to make the submission as streamlined as possible. We work with you to obtain the best results for your client. 

Key Risk Areas for Accountants

1. Purchase Price Apportionment

Section 562 CAA 2001 requires a “just and reasonable” apportionment, and HMRC expects evidence of how this was achieved.

At CPA we check if a property is entitled in accordance with the legislation, as well as surveying the property. These reports are then provided to be attached alongside the capital allowance claim which is submitted when the company returns or self-assessment is submitted. 

2. Section 198 Election Compliance

Failure to fix the disposal value under Section 198 (or address pooling requirements under Section 187A) can permanently restrict the purchaser’s entitlement.

This is often outside an accountant’s immediate control, but may become a problem post-completion if it is not addressed in advance.

Early involvement is key. This is where CPA assists and can review the sales contract and can provide input relating to the Capital Allowances, as well as preparing the election. Without the election, it is likely that the buyer will be unable to claim the allowances, as well as any future buyers.  

3. Repairs vs Capital Expenditure 

Misclassification in accounts can:

• Inflate capital allowance claims 
• Or suppress legitimate revenue deductions

Both create compliance exposure. We can help you in classifying which items are repairs and which are capital expenditures.  Where an item is capital expenditure, we can also assist on whether it qualifies as plant and machinery or structural and buildings allowance. 

4. Lack of Technical Support

Where claims are based solely on accounting review without:

• Site inspection 
• Cost segregation analysis 
• Technical referencing

They may lack sufficient defence under enquiry. We provide our specialist expertise and reports to work alongside you, ensuring the best results for your client and deal with any HMRC questions. 

What HMRC Typically Requests

• Detailed breakdown of qualifying assets 
• Basis of valuation 
• Survey methodology 
• Evidence of pooling by vendor 
• Copy of Section 198 election 
• Reconciliation to fixed asset register

We assist in all these areas to ensure information is detailed as possible before a submission. Should HMRC enquire, once a claim is made, we also assist in all responses. 

CPD on Capital Allowances 

At CPA, we understand that Capital Allowances may not be an area of tax that you are familiar with. We have worked with plenty of accountants, providing information sessions on Capital Allowances, including the legislation it is based on, explaining how they work and how a claim is made. 

These sessions have been crucial in helping accountants maximise tax savings for their clients. 

Let’s work together 

📩 Contact us today to learn more about capital allowances.