Updated: Dec 15, 2020
December, and of course January, can be important filing deadlines for many businesses and individuals so in this article we take a closer look at time limits for capital allowances claims.
For a capital allowances claim to be valid it must be made in a tax return. If you miss the deadline for making a claim, you can still submit an amended tax return which will normally be up to 12 months following the statutory filing date.
This means if you are a company that incurred expenditure in the year ended 31 December 2015 and have yet to make a claim you have until the end of this month to do so. If you incurred expenditure in the income tax year ended 5 April 2016 you have until 31 January 2018 to do same.
HM Revenue & Customs will normally not accept late claims via the overpayment relief rules so if you wish to claim for qualifying expenditure in the year it is incurred you must to do so within the traditional filing or amendment deadlines highlighted above.
This does not mean however, that missed claims for capital allowances are lost. Examples of time restricted claims (ie. those which must be made for the period in which expenditure is incurred) include: – Research & Developments Allowances, Enhanced Capital Allowances,
First Year Allowances and Annual Investment Allowances.
Crucially, items of plant or machinery, which account for 85%+ of all claims made, are not time restricted under the writing down allowances (18% or 8%) rules.
This means if you incurred qualifying expenditure, even many years ago, you may still be entitled to claim plant & machinery allowances (PMAs) now (e.g. for heating, security, ventilation, sanitary ware and certain lighting and cold-water systems). A key condition is that you still own the asset (ie. that it has not been sold or demolished). In such cases, the claim for PMAs is simply deferred.
There are of course many reasons a business may not have claimed their full entitlement to capital allowances and related reliefs. The most common reason being tax capacity at the time the original expenditure was incurred and the desire to avoid any unnecessary expense. Another can be poor information or changes in people close to the project or tax decisions at the time.
Whatever the reason, it is worth noting that with recent corporate restrictions to carried forward losses, interest deductibility and wider anti-avoidance, the need for understanding and claiming your full entitlement to all allowances, for companies, has never been more important. Failure to claim your entitlement can also affect your negotiating position on sale.