There are some major changes proposed to the Capital Allowances regime due to take effect on 1st April 2008 (6th April for Income Tax). These changes will impact directly on owners of and investors in commercial property.

The most significant change will be the introduction of a new 10% writing down allowance for items of plant and machinery that will fall within a new definition of ‘integral features’ - this definition will include:

• Electrical systems (including lighting systems)
• Cold water systems
• Space or water heating systems, powered systems of ventilation, air cooling or air purification, and any floor or ceiling comprised in such systems
• Lifts, escalators and moving walkways

The definition will also extend to thermal insulation of existing commercial buildings as well as certain environmentally friendly design features that will initially comprise external solar shading and active façades.

The majority of ‘integral features’ do actually qualify as plant and machinery at the moment, attracting an annual writing down allowance of 25%.

This rate will, however, be reduced to 20% in April on all existing items at the time of the change.

The combination of these changes means whilst the level of allowances on commercial property is likely to increase, the annual benefit will almost certainly fall.

As the changes are not due to take place until April, a window of opportunity exists for careful tax planning to help mitigate the effects.

Other topics discussed in this update include:

• Tax planning opportunities
• Enhanced Capital Allowances
• Further help
• Response to the latest HMRC Consultation

Please download the newsletter for further information.