Capital allowances—interaction with CGT, VAT and stamp taxes


Produced in partnership with Steven Bone of Gateley
Practice notes

Capital allowances—interaction with CGT, VAT and stamp taxes


Produced in partnership with Steven Bone of Gateley

Practice notes
imgtext

This Practice Note sets out how the capital allowances Rules interact with the rules relating to:

  1. •

    Capital gains tax, including corporation tax on chargeable gains (CGT)

  2. •

    value added tax (VAT), and

  3. •

    stamp taxes, namely:

    1. â—¦

      Stamp Duty Land Tax (SDLT) in England and Northern Ireland

    2. â—¦

      land and buildings transaction tax (LBTT) in Scotland, and

    3. â—¦

      land transaction tax (LTT) in Wales

It is a common misconception that claiming capital allowances for plant and machinery will reduce the CGT base cost of an asset and hence increase any gain. This is not true—claiming plant and machinery allowances does not reduce a taxpayer’s CGT base cost in a capital asset. However, a claim for these allowances may restrict the extent to which any capital losses are allowable upon a subsequent disposal.

The impact of VAT on capital allowances is sometimes overlooked by taxpayers or their advisers. The amount of VAT may be large (currently 20% of the net asset cost) and there is also the risk

Steven Bone
Steven Bone

Director, Gateley

Steven is a tax-qualified chartered surveyor. He has specialised in capital allowances for more than 25 years, and more recently land remediation relief and R&D tax incentives. 

In his role as director at Gateley Capitus, Steven works with businesses that are buying, building or refurbishing commercial property, cleaning-up contaminated land and buildings or undertaking R&D activity to help them pay the right amount of tax by optimising the tax reliefs available to them.

Prior to joining Gateley Capitus, Steven held senior roles in the Big 4, specialist boutique and national mid-tier accountancy firms. He is a fellow of the Royal Institution of Chartered Surveyors (RICS) and the Association of Taxation Technicians.

Alongside daily practice, Steven is a tax incentives writer and speaker for property investment and innovation activity. 

Read moreRead more
Powered by Lexis+®
Jurisdiction(s):
United Kingdom
Key definition:
Rules definition
What does Rules mean?

The detailed provisions of a pension scheme.

Read more

Popular documents

When would preference shares fall under the shares as debt rules and hence the dividend payments would

When would preference shares fall under the shares as debt rules and hence the dividend payments would fall to be taxed as debt as opposed to qualifying for the corporation tax exemption for dividend payments?The ‘shares as debt’ rules applied to shares held by companies up until 21 April 2009 (for

Is there any guidance as to the appropriateness of defining ‘Control’ as either (a) in accordance with

Is there any guidance as to the appropriateness of defining ‘Control’ as either (a) in accordance with section 1124 of the Corporation Tax Act 2010, or as (b) the beneficial ownership of more than 50% of the issued share capital of a company or the legal power to direct or cause the direction of the

Qualifying charitable donations and excess management expenses

Qualifying charitable donations and excess management expensesAll companies within the charge to corporation tax can deduct qualifying charitable donations from their total profits, after all other deductions have been made (other than group relief and group relief for carried-forward losses) to

Distribution key concepts—repayment of capital

Distribution key concepts—repayment of capitalAlongside the concept of new consideration, which is further explained in Distribution key concepts—new consideration, the concept of repayment of capital is vital in determining whether certain transactions are distributions.At the broadest level the