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New guidance on Capital Allowances highlights that Construction is a particularly complex area

HMRC have published guidance which warns businesses to check their capital allowances claims carefully.

Capital allowances are a type of tax relief for businesses which allow you to deduct some or all of the value of an item from your profits before you pay tax.


Not a policy change

The guidance doesn’t involve any changes in HMRC policy, rather, it’s designed to give businesses a better understanding of how to make the most of available tax reliefs and to avoid making mistakes on forms.

The guidance says that many common errors in claims appear to arise because the claimant makes assumptions rather than fully checking the facts of the transaction leading to a claim and that fully checking the facts helps to show you have met your obligation to take reasonable care that your claim is correct.

The useful guidance, which can be found here, gives advice on what is qualifying expenditure; assets in residential property; HP and similar arrangements; special rate assets; milestone contracts; fixtures; full expensing and much more.


Construction projects an area where significant errors are made

HMRC has warned that construction projects can be a particular area for concern saying that:

‘Problems can arise when you decide to treat something as capital based solely on the accounting treatment.

‘The facts and context of the expenditure must be checked against the capital expenditure tax rules.

‘Construction projects are an area where significant errors are made. It is important to consider the facts and context of expenditure before treating it as capital or revenue.

‘This can be a complex area and you may need to consult a tax adviser if you are uncertain whether expenditure is capital or revenue in nature.’

‘Where the decision to treat something as capital expenditure or as plant or machinery has needed an analysis of the law, providing an explanation with your tax return may reduce the need for HMRC to contact you about the claim,’ advised HMRC.


The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
5th June, 2024
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