Construction projects ― considerations

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Construction projects ― considerations
  • Property developers
  • Potential allowances
  • Incidental and installation costs
  • General considerations

Capital allowances are available on construction work on commercial property where the completed building will be classified as a tangible fixed asset in the financial statements of a company, such as:

  • companies constructing buildings for use in the business
  • companies refurbishing / fitting out an existing property for use in the business

Capital allowances may also be available on the construction of a building to be held as an investment by a property investment company.

In order to maximise the level of capital allowances available, it is important to carry out detailed planning before, during and after construction and to retain appropriate supporting documentation.

Construction projects may take several years to complete and consequently the timing of expenditure must be considered when compiling the relevant capital allowances claims. The basic rule set out in CAA 2001, s 5 is that expenditure is 'incurred' on the date upon which the obligation to pay becomes unconditional. The expenditure on qualifying assets is likely to be spread over the course of the construction project and consequently the capital allowances claims will need to be spread over several accounting periods. The When expenditure is 'incurred' guidance note sets out these provisions in more detail, together with the exceptions to the basic rule. Whether the trade of the company has already commenced or is yet to commence will also impact the timing of capital allowances. See CAA 2001, s 12.

Property developers

Property developers will not be able to claim capital allowances on construction work, as the completed

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