With tax relief available on the purchase of fixtures and fittings and the bonus of a Full Expensing on purchasing assets to fit out a warehouse, transport and logistics companies should give consideration in advance of a commercial property purchase or fit out to ensure they maximise the relief available.
Fixtures and fittings on purchase of a commercial property
Ideally the value of the integral fixtures should be agreed by way of a ‘s198 election’ and this is an agreed value between the buyer and the seller. The purchaser can then claim 6% writing down allowances on the value agreed, for example:
Year 1
| Value of Integral features agreed | £100,000 |
| Writing down allowances at 6% | £6,000 |
| Amount carried forward | £94,000 |
Year 2
| Brought forward amount | £94,000 |
| Writing down allowances at 6% | £5,640 |
| Amount carried forward | £88,360 |
The balance will continue to be written down annually and in the above example this would mean a total of £25k tax saving (at current tax rates).
If your company is considering purchasing a property, potential negotiation points to consider include:
- If no capital allowances value is agreed between the buyer and seller, no claim can be made for future capital allowances
- If the seller could have claimed allowances but did not for any reason, they must pool the expenditure before the sale of the building
- If the seller doesn’t comply with the value election, they risk HMRC raising a balancing/tax charge
ACTION – Remember to speak to your tax advisor early in the process when considering purchasing a new property
Full Expensing – plant and machinery
Relief is also available via Full Expensing on eligible assets when fitting out a warehouse, and includes items such as:
- racking
- mezzanine floors used for storage
- partitions which are moveable and are intended to be moved as part of the company’s trade
- specialist/protective storage equipment
- drainage installations
- communications installations
On assets such as the above, a deduction of at 100% of the cost of the asset is available against taxable profits. This essentially means companies are saving 25p for every £1 spent. The relief is separate to the Annual Investment Allowance (AIA), which can then be used to obtain tax relief on other assets which may not be eligible for Full Expensing. There is no upper limit on the amount of Full Expensing which can be claimed, and assets bought either via hire purchase or directly outright are eligible.
The Full Expensing regime was originally supposed to end in 2026 but the Government have now announced this will be available permanently.
Special Rate first year allowances – Integral features
There will also be certain elements within a warehouse fit out that relate to integral features such as:
- Lighting systems
- Ventilation
- Air conditions/heating systems
If eligible, the company can claim tax relief on 50% of the cost of qualifying expenditure. As with the full expensing, there is no upper limit on the amount that can be claimed, provided certain conditions are met.
ACTION – Companies should consider the timing of any capital spend/disposals sooner rather than later in the process in order to take advantage of the super-deduction whilst it remains available.
Summary
Overall, There are some generous tax treatments that surround the acquisitions of property or equipment. The key point to remember is to speak to your advisor early in the process so you can fully understand all the implications and benefits around the transactions.
If you would like to find out more about capital allowances on warehouses, contact Natasha Spicer.
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