There are various regulations that have the power to allow for property capital allowance which is the expenditure amount likely to be claimed against the taxable profit for a given asset. Property capital allowance is usually claimed on an asset that has been purchased to be used in a business. It depends on the classification of the property so as to determine whether a full or a partial claim can be done. To claim the property capital allowance, the business is required to calculate the total amount of the allowance to be claimed in a given taxation period. Once the total amount has been calculated, it should be submitted when the business is filling information during tax returns so that it can be forwarded to the responsible bodies to act on the claim.
Various types of property that capital allowance is allowed includes machinery, equipment, vehicles such as vans, trucks and cars. Property capital allowance can also be provided for the cost incurred during research and development, renovations of the premises for doing business as well as patents. There are some properties that cannot be claimed as a capital allowance such as items that have been leased, structures, buildings, land as well as other items used for purposes of entertainment such as music systems and boats. Before payment of taxes, a business can deduct part or all the value of the asset to compensate for the property capital allowance.
There are various types of property capital allowance which includes annual investment allowance, the writing down allowance and the first-year allowance. The full value of the asset used entirely for the purposes of the business which can be as high as the limit of the capital allowance can be deducted in the annual investment plan. The deduction of the annual investment allowance can be done in the similar taxation year period and when the item was acquired. Writing down allowance is where the business is able to deduct a given amount of the total value of the property from their profits each year. First year allowance also known as enhanced capital allowance is where capital allowance deduction is only made during the year when the item was purchased. Items that is water or energy efficient such as cars whose carbon emission is low and water and energy saving devices are the only ones which one can claim for the first-year allowance.
The main benefit of property capital allowance is that tax charged to a business is reduced which includes the amount of money spent in purchasing the property in question. This in returns enhances business growth as the money can be reinvested to the business.