Capital allowances for office fit outs & commercial renovations

Renovating your office or commercial property? Don’t miss out on the tax savings you may be entitled to. Whether you’re planning an office fit out, refurbishing a commercial building, or undertaking a wider renovation, understanding capital allowances is crucial for maximising your tax relief.

Understanding capital allowances for office renovations

While many business owners understand how to treat general repair costs, which are typically allowed as revenue expenditure and deducted through the Profit and Loss account, there is often confusion around costs that must be treated as capital expenditure.

There will normally be costs associated with the renovation which can’t be claimed as repairs and these capital costs instead are treated as fixed assets for accounting purposes and may qualify for capital allowances, offering significant tax relief when handled correctly.

Why capital allowances are often overlooked

In most office fit out or commercial renovation projects, the fixed asset component of the costs is frequently neglected. This is often due to the lack of detailed cost breakdowns provided by contractors. As a result, businesses can miss out on substantial tax savings.

To avoid this, it is important to ensure that your contractors maintain a detailed schedule of works which can be used to identify qualifying assets and to assist in calculating the capital allowances. If your renovation project has already been completed and no detailed records are available, all is not lost. A retrospective review of the work can still uncover eligible capital allowances.

First-year allowances and historic claims

First Year Allowances (FYA) must be claimed in the period in which the expenditure is incurred.

Even where FYA has been missed, tax relief can still be maximised on historic claims by utilising Written Down Allowances (WDA) at the highest applicable rates, subject to the asset remaining in use.

Commonly missed capital allowance opportunities

When it comes to office refurbishments and commercial property renovations, many businesses, and even accountants and tax advisors fail to identify the full range of qualifying costs.

Often overlooked areas include:

• Demolition costs
• Preliminary costs, such as:
  • Survey fees
  • Architects’ fees
  • Quantity surveyors’ fees
  • Service and structural engineers’ fees
  • Legal fees
• Trade-specific capital assets, such as bespoke installations or fit outs tailored to industry needs

Each of these may qualify for capital allowances under various, complex tax rules and legal interpretations provided they are documented and assessed appropriately. This helps to determine the treatment of capital allowances between the three main pools.

Types of capital allowances pools

Capital allowance claims generally fall into three main pools:

• Main Pool – For standard plant and machinery
• Special Rate Pool – For long-life assets or integral features
• Structures and Buildings Allowance (SBA) – For structural or renovation-related costs

How to maximise capital allowances on your renovation project

To get the most from your office fit out or commercial property renovation, speak to our tax team early in the planning process. Even if the project is complete, we can still help assess your expenditure and identify missed opportunities.

Our specialists apply deep technical expertise and practical insight to ensure your capital allowances claims are both accurate and fully maximised.

Get in touch

Contact our expert team today to discuss your business requirements and to explore how capital allowances can reduce the cost of your next office renovation or commercial property upgrade.

Photo by Nick Fewings on Unsplash