Capital Allowances in Healthcare

If you own or are thinking about buying commercial properties like medical offices or labs, there’s a golden opportunity for you. It’s not just a tax loophole; it’s a government-endorsed way to save money. Your property holds significant tax breaks, ready for you to claim.

What are Capital Allowances for the Healthcare Sector?

You’re probably familiar with capital allowances if your business has invested in equipment like dental chairs, X-ray machines, or computer systems. This kind of tax planning is actively supported by the government, and it’s a great way to encourage business growth. But it’s not just about equipment. You can also claim capital allowances for more substantial expenditures incurred. For example, if you’ve spent money to buy, refurbish, refit, or even extend a property, these expenses can qualify for capital allowances. It’s a great way to make your property investments work harder for you.

  • Annual Investment Allowance (AIA): Allows businesses to deduct the full value of qualifying capital expenditures, such as medical equipment and machinery, from their taxable profits in the year of purchase, up to a specified limit.
  • Writing Down Allowance (WDA): Permits businesses to claim a percentage of the remaining value of qualifying assets, such as buildings or equipment, as a deduction from taxable profits each year. The percentage varies depending on the type of asset.
  • Research and Development (R&D) Allowances: Provides additional deductions for qualifying R&D expenditures, encouraging investment in research and development activities related to healthcare innovation.
  • Enhanced Capital Allowances (ECAs): Offers accelerated tax relief for investments in energy-saving technologies and environmentally beneficial equipment, which may include certain healthcare-related technologies.
  • First-Year Allowance (FYA): Allows businesses to claim a higher percentage of the cost of qualifying assets in the first year of purchase, providing an additional incentive for immediate investment.
  • Full expensing. According to recent changes, from 1 April 2023 to 31 March 2026, there are new measures as a valuable alternative to the previous 130% super deduction which was valid from 1 April 2021 to 31 March 2023. These measures provide a 100% first year allowance for main-rate expenditure and a 50% first-year allowance for new special rate assets. Please note that Full Expensing is only available to those entities subject to Corporation Tax on Main Pool assets which are acquired brand new and not to be leased.  
What Are Capital Allowances?

How to Claim Capital Allowances in Healthcare

Two main types of Capital Allowances can be significantly beneficial for your healthcare business.

Plant and Machinery

Plant and machinery assets breathe life into an empty property, turning it into a functional business space, ready for “trade.” These assets go beyond traditional machinery, encompassing essential elements like bathrooms, wash stations, central heating, and passive ventilation systems that create a comfortable environment.

Additionally, safety equipment such as CCTV, fire detectors, and door closers ensures smooth operations at your healthcare facility. Best of all, these assets are eligible for capital allowances, allowing you to offset their cost against taxable profits and achieve significant tax savings.

Integral Features

Key building systems such as electrical and water supplies, lifts, and heating or cooling installations are the unsung heroes of your healthcare facility, ensuring smooth operations and patient comfort. Just like plant and machinery assets, these features are also eligible for capital allowances, allowing you to offset costs against taxable profits. This can lead to significant tax savings for your healthcare business, making your property investment a strategic financial move as well as a business necessity.

Qualifying Expenditure for Capital Allowances on a Healthcare Property

Healthcare properties can benefit from capital allowances that can be claimed by both Property and Operating Companies. The range of qualifying expenditures is extensive, covering costs for acquiring second-hand properties, constructing new buildings, refurbishing existing ones, and fitting out spaces.

This includes a broad category of properties such as Care Homes, Nursing Homes, Dementia Units, Private Hospitals, Dentists, and Doctors Surgeries. Specific assets related to the trade, such as accessibility works, hygiene installations, and specialist equipment like medical gas, can also be claimed. This presents an opportunity to save on taxes while investing in the healthcare sector.

Acquisition of Second Hand Property

To protect the buyer’s position when buying a second-hand property, it’s important to seek early advice at the heads of terms stage. This means working closely with legal and transaction teams to ensure the right wording in the heads of terms and purchase contract. Following the Capital Allowances Act 2001, conducting an initial review and due diligence helps determine entitlement and uncover any potential restrictions.

Sellers should be approached to gather relevant historical project or cost data for Structures and Buildings Allowances, obtaining an allowance statement in the process. This includes getting details of previously claimed trade equipment. Once collected, this information should be used to survey and prepare fully detailed capital allowances reports, ready for submission to HMRC.

Throughout this process, it’s crucial to maintain open lines of communication with the client’s accountant and tax advisors, ensuring a smooth and efficient execution of the claim. This methodical approach can help healthcare businesses maximize the benefits of capital allowances.

New Build Expenditure Including Refurbishments and Fit Outs

Undertaking a new build or planning renovations and fit-outs is no small feat. It involves careful planning and strategic advice at every turn. One way to boost your savings is to start thinking about capital allowances early on. This means offering guidance to your project team on tender wording and strategic planning for capital allowances. This early input can steer the project towards maximizing potential tax savings.

Additionally, a thorough survey is essential to prepare comprehensive capital allowances reports. These reports should fully disclose the identification of repairs, plant and machinery allowances, Structures and Buildings Allowances, and even Land Remediation Expenditure. This identification ensures that all eligible costs are considered, leading to a comprehensive claim.

Throughout this capital allowances process, it’s crucial to maintain active collaboration with your accountant and tax advisors. They can help ensure that the capital allowances identified align with your client accounts. This collaborative approach can maximize the tax saving, ensuring your healthcare business benefits fully from capital allowances. The aim is to use your property investments not only to serve your patients but also to enhance your financial efficiency.

Wear and Tear Allowances on Healthcare Property

If you’ve made significant investments in the healthcare sector, such as purchasing, building, extending, fitting out or refurbishing a property, you may be eligible for wear and tear allowances. The potential tax or cash benefit could be as much as 12.5%, 25%, or even 55% of the total qualifyingcapital  expenditure. Think of wear and tear allowances as a tax-deductible expense, available for qualifying capital expenditure committed to the provision of new plant and machinery. Thus, they offer another avenue for reducing your tax liabilities, providing significant savings that can be reinvested in your healthcare business.

These allowances can be claimed on properties including:

  • nursing homes
  • primary care centres
  • hospitals
  • healthcare centres
  • medical centres
  • residential care centres

How Our Elect Team Can Help You Claim Capital Allowances in Healthcare

As premiere consultants for Capital Allowances claims, we have extensive knowledge of how to make accurate capital allowance claims. We take a hands-on approach, leveraging our expertise to ensure our clients get the financial benefits they deserve. 

We thoroughly review capital expenditure incurred to identify the highest qualifying expenses and support accountants and lawyers in fulfilling their responsibilities.

While claiming capital allowances carries risk, our proficiency in tax legislation, HMRC procedures, and surveying, along with our attention to detail and use of technology, allows us to prepare detailed, well-investigated claims. This not only assures our clients but also helps them receive timely tax refunds, saving their valuable resources. Get in touch with us today and see what as valuable capital allowances are available for you!

FAQs

Are healthcare capital allowances considered high risk?

No, capital allowances in the healthcare sector are not high-risk if managed correctly. The key is to comply with HMRC rules and regulations and claim only for eligible expenses. Working with experienced capital allowances consultants is advised. They can guide you, identify qualifying expenses, and ensure a robust and compliant claim, reducing potential risks.

Is full expensing applicable to healthcare facilities?

Yes, full expensing can apply to healthcare facilities. It allows businesses to deduct the entire cost of certain business-related expenses, like plant, machinery, and equipment, in the year of purchase instead of spreading the deduction over several years. This can give a big boost to cash flow and be a valuable tool in managing business finances. However, it’s always best to consult with a professional advisor or a capital allowances consultancy to fully understand how these rules apply to your specific circumstances.

How can healthcare property owners save tax?

The key types of capital allowances that matter include those for “plant and machinery” and “integral features”. Plant and machinery allowances are given for items that turn a basic structure into a functional business or trading space. This could include things like sanitary ware, CCTV, fire detectors, door closers, and even central heating and passive ventilation. On the other hand, integral features refer to larger systems within a building such as electrical and water supplies, and heating or cooling installations.