QI have a property that is used in my business on which I have been entitled to claim industrial buildings allowances.
I gather that the capital allowances regime has undergone a massive overhaul recently and would like to know what impact these will have on the allowances that I can claim on this property.
CM, DumfriesA Un
til recently, tax relief of 4 per cent a year was available on the building costs of qualifying industrial buildings.
However, these allowances are being phased out from 2007 over four years, with a 1 per cent reduction each year until full abolition from April 2011.
So by 2011 you will not be able to claim any further tax relief on the original building, which may be a huge blow if at that point you still have significant allowances to claim. However, some businesses will be winners if they are scheduled to sell industrial buildings as there is no longer any clawback of the allowances previously claimed.
The government has also softened this blow by introducing a new writing down allowance of 10 per cent a year on a reducing balance basis on certain integral-features expenditure in buildings.
These allowances are due on integral features in all buildings and include items that did not previously qualify for capital allowances (apart from the 4 per cent industrial buildings allowances) such as electrical systems and a cold water system.
However, the 10 per cent rate also applies to other assets such as heating systems, air ventilation systems and air conditioning systems, which previously qualified for tax relief at 25 per cent a year.
The integral feature rules apply to all assets acquired from April 2008.
Costs of repairs to integral features are also subject to new rules. These rules distinguish between a repair – for which you can get an immediate tax deduction – and a replacement of an integral feature, the cost of which only attracts the 10 per cent allowance.
Replacement expenditure is defined as expenditure incurred where either the whole or more than 50 per cent of the integral feature is replaced within a 12-month period.
• If you have a question you need answered, write to Jeff Salway, Personal Finance Editor, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail:
. These answers are for guidance only. No responsibility for loss occasioned by any person acting, or refraining from acting, as a result of these answers can be accepted by Grant Thornton or The Scotsman Publications Ltd
The full article contains 423 words and appears in The Scotsman newspaper.
