The tax treatment of expenditure used to refurbish buildings falls into three broad categories: repairs, for which a full tax deduction can be claimed in the accounting period in which the cost was incurred; alterations to the fabric of the building, which is then added to the cost of the premises and taken into account if the property is sold; and fixtures for which capital allowances can be claimed.
Currently where the total of all expenditure which falls into category 3 in the same accounting period amounts to more than £500,000, the tax deduction in the form of CAs can be claimed on the whole amount. Therefore, the tax relief obtained for repairs or fixtures are the same, in the short term.
If your company decides to move premises, it is possible some of the tax relief obtained through capital allowances might be taken back. Where expenditure has been allocated to fixtures that qualify for CAs it is typical that you agree a value for them with the buyer when selling the property and send joint notification to HMRC confirming the details. The buyer is likely to want to use as high value for these fixtures as they will be able to claim some CA on them.
If you had treated the new fixtures as repairs, this will mean there will be no claw back; however, you cannot list all fixtures as repairs. There is a grey area about whether to treat some items as fixtures or repairs. It is advised that if, for example, a cupboard could be listed as a repair; you list it as repair costs rather than the purchase of fixtures. This way you will avoid tax relief being taken back.
For further information, please do not hesitate to contact Robert Marsdenrobert.marsden@myersclark.co.uk or 01923 224411