The relief follows the money, not the title deeds
Most writing about capital allowances is addressed to owners, which leaves a lot of businesses assuming the subject has nothing to do with them. It usually does.
Capital allowances attach to the person who incurred the expenditure on qualifying plant and machinery. If you lease your premises and you paid for the fit-out, that expenditure is yours. Whose name is on the title is a separate question from whose money went into the ceiling.
This matters because fit-out is where a very large share of qualifying expenditure sits. An owner buying an existing building has to apportion a purchase price between land, structure and fixtures, which takes a survey. A tenant who fitted out a unit has usually paid for the qualifying items directly and can point at the invoices.
What a tenant fit-out typically contains
The list is the same list that applies to owners, because the law does not have a separate category for tenants. What changes is that you are far more likely to have paid for these items in one identifiable project:
- Partitioning, suspended ceilings and raised floors
- Air conditioning, ventilation and heating
- Lighting and the electrical installation serving it
- Kitchens, tea points and sanitaryware
- Data cabling and comms room equipment
- Fire alarms, sprinklers, security and access control
- Signage, blinds and window treatments
Some of these fall into the main pool at 18% a year and some into the special rate pool at 6%. The split matters to the timing of your relief, which is why it is worth having the expenditure broken down properly rather than posted as one line called “shopfitting”.
Lease length does not disqualify you
A common assumption is that a short lease rules out a claim, on the logic that you will not be there long enough to benefit. That is not how plant and machinery allowances work. There is no minimum lease term. A five year lease with a fit-out in year one can carry a perfectly ordinary claim.
What lease length does affect is what happens at the end, which is covered further down.
Where a landlord contribution changes things
This is the part that catches people out, and it is the single most useful thing to establish early.
If your landlord contributed to the fit-out, whether as a cash contribution, a reverse premium, or by carrying out works themselves, then some of that expenditure was not incurred by you. You cannot claim allowances on money you did not spend. Depending on how the contribution was structured and documented, the landlord may be entitled to allowances on their share instead, or in some arrangements neither party ends up claiming because nobody established who was entitled to what.
The paperwork decides it. A licence to alter, a schedule of works, an agreement for lease and the way the contribution was described in it are all relevant. This is exactly the kind of thing worth looking at while the documents are still to hand rather than four years later.
Common situations
I fitted out the unit myself and the landlord paid nothing. The straightforward case. The expenditure is yours and the allowances should follow it.
The landlord gave me a rent-free period instead of a contribution. A rent-free period is not a contribution to your capital expenditure. It generally does not reduce what you can claim on works you funded, though the lease terms are worth reading rather than assumed.
The landlord contributed a fixed sum towards the works. Your claim is on your share. The contribution needs identifying and stripping out, and the landlord’s position on their share is a separate question.
I took an assignment of an existing lease with the fit-out already in place. Then you are buying fixtures from the outgoing tenant, and the fixtures rules apply in much the same way they do on a property purchase. What the assignment documented about the fixtures value matters a great deal.
I have carried out several refits over the years. Each project is its own expenditure. Older refits that were never claimed are often still available, and superseded items may need writing out. This is usually where the largest unclaimed amounts are found.
What happens when the lease ends
If you leave the fixtures behind at the end of the lease, there is a disposal to account for, and the treatment depends on what the lease says about reinstatement and on what, if anything, you were paid.
Reinstatement itself, stripping out your fit-out to return the unit to shell, is normally a revenue cost rather than a capital one, which is a different relief entirely and often overlooked in the other direction.
If you are approaching a lease end, an assignment or a renegotiation, it is worth understanding your capital allowances position before you sign anything. The same principle applies as on a property sale: the value is easiest to protect while there is still a negotiation happening.
What to have to hand
You do not need any of this to answer a few questions, but it is what a claim will eventually rest on:
- The fit-out invoices or the contractor’s final account
- Any schedule of works or cost breakdown
- The lease, plus any licence to alter or agreement for lease
- Anything documenting a landlord contribution
- The dates the works were carried out and when they were brought into use
Where this sits alongside everything else
If you both own property and lease other premises, both routes can run at once. They are separate pieces of expenditure and they are assessed separately.
None of the above is advice about your specific position. It describes how the relief works so you can judge whether it is worth investigating. The survey, the valuation and the claim are carried out by capital allowances specialists, and the numbers depend entirely on what was installed and who paid for it.