If you own or invest in commercial property, you may be missing out on significant tax relief. Integral features capital allowances allow you to claim tax deductions on specific building systems that are often overlooked. This guide explains what qualifies, how the rates work, and how to make a valid claim.
What Are Integral Features Capital Allowances?
Integral features are specific systems and installations within a building that qualify for plant and machinery capital allowances. They are not the building itself, but the mechanical and electrical systems that make it functional. HMRC defines integral features as: lifts, escalators and moving walkways; space and water heating systems; air-conditioning and air cooling systems; hot and cold water systems (but not toilet and kitchen facilities); electrical systems, including lighting systems; and external solar shading [1].
These items are treated as plant and machinery for tax purposes, meaning you can claim relief on the cost of purchasing or installing them. The key distinction is that integral features are part of the building's infrastructure, not standalone equipment. For example, a boiler that heats the entire building is an integral feature, but a portable heater in an office is not.
Who Can Claim Integral Features Capital Allowances?
You can claim integral features capital allowances if you own a commercial property and have incurred capital expenditure on qualifying items. This applies to landlords, property investors, and businesses that occupy their own premises. The relief is available on both new builds and acquisitions of second-hand commercial property, subject to certain conditions [1].
If you let residential property, the rules are more restrictive. You can only claim for integral features in a residential building if it has multiple residential units, like a block of flats, or if the item is used in a communal part of the building [1]. For standard buy-to-let properties, integral features capital allowances are generally not available. If you are unsure how this interacts with your portfolio, our property accountant services can help clarify your position.
What Items Qualify as Integral Features?
The list of qualifying integral features is set out in legislation and HMRC guidance. The main categories are:
- Lifts, escalators, and moving walkways, any mechanical system for moving people or goods between levels.
- Space and water heating systems, including boilers, radiators, underfloor heating, and associated pipework.
- Air-conditioning and air cooling systems, including ventilation systems that are powered.
- Hot and cold water systems, but not toilet and kitchen facilities themselves [1].
- Electrical systems, including lighting, the system for distributing electricity from the point of entry to the building [2].
- External solar shading, fixed shading devices attached to the building exterior [1].
Importantly, permanent features such as floors, walls, and ceilings are excluded from integral features [3]. Similarly, you cannot claim plant and machinery allowances on land structures like bridges, roads, or docks, nor on buildings themselves, including doors, gates, shutters, and mains water and gas systems [1].
What Are the Rates of Relief?
Integral features fall into the special rate pool for capital allowances. The writing-down allowance for this pool is 6% per annum on a reducing balance basis [3]. This means you can claim 6% of the remaining tax value each year. For example, if you spend £100,000 on qualifying integral features, you can claim £6,000 in year one, then 6% of the remaining £94,000 in year two, and so on.
However, you may be able to claim the full cost in the year of purchase using the Annual Investment Allowance (AIA). The AIA currently allows you to deduct 100% of the cost of most plant and machinery, including integral features, up to a certain limit. In most cases you can deduct the full cost of items from your profits before tax using AIA [1]. The AIA limit has been set at £1 million since 1 January 2019 and remains at that level for the 2025/26 tax year [3]. This makes AIA a powerful tool for property investors making significant capital improvements.
How to Claim on Second-Hand Property
When you buy a building from a previous business owner, you can usually only claim for integral features and fixtures that they claimed for [1]. This is a critical point. You cannot simply value the integral features yourself and claim relief on the full amount. You must agree the value of the fixtures with the seller. If you do not, you cannot claim for them [1].
This process is known as a capital allowances election. Both buyer and seller must sign a joint election under section 198 of the Capital Allowances Act 2001, specifying the amount of expenditure that relates to the fixtures. Without this election, HMRC will not allow the claim. If you are purchasing a commercial property, it is essential to address this during the conveyancing process. Our team at Property Tax Partners can advise on the documentation required.
Structures and Buildings Allowance vs Integral Features
Since 29 October 2018, a separate relief called the Structures and Buildings Allowance (SBA) has been available for new non-residential buildings and structures. The SBA provides a 2% annual straight-line allowance over 50 years on the cost of the building itself [4]. However, the SBA is not available for assets that qualify for plant and machinery allowances, including integral features [4].
This means you must continue to claim plant and machinery allowances on qualifying fixtures attached to buildings and structures [4]. The two reliefs are mutually exclusive. If you are constructing a new commercial property, you should identify which costs relate to integral features (eligible for 6% or 100% AIA) and which relate to the building structure (eligible for 2% SBA). Proper cost apportionment at the design stage can maximise your total relief.
Common Pitfalls and How to Avoid Them
One common mistake is claiming for items that do not qualify. For example, ducting systems can be tricky. The cost of a ducting system within the building follows the tax treatment of the system or systems that the ducting supports [2]. Where ducting supports two or more systems simultaneously, the relevant expenditure should be apportioned on a fair and reasonable basis [2]. This requires careful analysis.
Another pitfall is failing to make a valid election on a property purchase. Without a section 198 election, you lose the right to claim on the fixtures. This can be a costly oversight. Additionally, remember that integral features capital allowances are not available on standard residential buy-to-let properties. If you own a mixed-use property, you may need to apportion costs between the residential and commercial elements. Contact us for tailored advice on your specific situation.
How to Make a Claim
To claim integral features capital allowances, you must include the expenditure in your capital allowances computation as part of your tax return. For sole traders and partnerships, this is done on the self-assessment tax return. For limited companies, it is included in the corporation tax return. You should maintain a detailed fixed asset register showing the cost and date of acquisition of each integral feature.
If you are using the Annual Investment Allowance, you claim the full cost in the year of purchase. If the expenditure exceeds the AIA limit, the balance goes into the special rate pool and attracts writing-down allowances at 6% per year. You can also claim a balancing allowance when you sell or dispose of the property, which can accelerate relief on any remaining tax value.
Why Professional Advice Matters
Integral features capital allowances are a specialist area of UK tax law. Getting the classification wrong, failing to agree values with a seller, or missing the election deadline can all result in lost relief. A property accountant with experience in capital allowances can help you identify qualifying expenditure, prepare the necessary documentation, and maximise your claims. What does a property accountant do in this context? They ensure you claim every pound of relief you are entitled to, while staying compliant with HMRC rules.
If you are considering incorporating your property business, capital allowances can also be a factor in the transfer of assets. Our incorporation services can help you structure the transaction tax-efficiently, including the treatment of integral features.
Final Thoughts
Integral features capital allowances are a valuable but often overlooked relief for commercial property investors. By understanding what qualifies, the rates of relief, and the claiming process, you can reduce your tax liability and improve your property's net return. The key steps are: identify qualifying expenditure at the time of purchase or construction, agree values with the seller on second-hand properties, and claim the relief promptly through your tax return.
Given the complexity of the rules, particularly around second-hand property and mixed-use buildings, professional advice is strongly recommended. How to choose a property accountant who specialises in capital allowances is an important decision for your portfolio's tax efficiency.
Sources
- gov.uk: Claim capital allowances: What you can claim on - GOV.UK
- hmrc.gov.uk: CA22330 - more detail - HMRC internal manual - GOV.UK - GOV.UK
- accaglobal.com: Maximising capital allowances relief - ACCA Global
- taxscape.deloitte.com: Capital allowances - new Structures and Buildings Allowance