Claiming capital allowances on historic expenditure

We were recently asked about claiming tax relief on capital expenditure which had been incurred in previous accounting periods.

This form of tax relief is known as ‘capital allowances’ and is available on qualifying expenditure, such as plant, machinery, office equipment and various types of vehicle.

Capital allowances are claimed in the tax return for which the filing date is twelve months from the end of an accounting period. However, the claimant has a further twelve months to amend its claim by amending the tax return. The effect is therefore a two year time limit in most circumstances. Additional time may be available if there is an open HMRC enquiry.

However, a capital allowance review may show that there was an underclaim in tax relief for a previous period. If you are still within time to amend your tax return, the claim can be made by submitting an amended return.

If you are outside the two year time period, the only recourse is via a claim for recovery of overpaid tax but this specifically prevents taxpayers rectifying errors for capital allowances.

Prior to 1 April 2010 though, the process was via the ‘error and mistake’ claim and under these rules, it may be possible to reclaim. The time limit for error and mistakes claims was no later than six years after the end of the accounting period to which the return relates.

To discuss capital allowances in more detail and for help in maximising tax relief in this area, please contact Curo’s head of tax, Julia Whelan on 01527 558539 or email Julia on [email protected]

Curo Chartered Accountants

Curo is based near Bromsgrove, Worcestershire