Author
Ryan Watson, Head of Capital Allowances at Leyton
3 minute read
Capital Allowances: A Missed Opportunity for Scotland’s Engineering & Manufacturing Businesses?
Across Scotland’s engineering sector, investment in infrastructure, plant & machinery, and property has accelerated in recent years – driven by growth, innovation, and the push for long-term operational efficiency. But while these projects are vital for business development, many companies are overlooking a significant opportunity to improve their financial position: Capital Allowances.
Capital Allowances are a form of tax relief that enable businesses to offset qualifying capital expenditure – such as spending on buildings, equipment, and installations – against taxable profits. This can lead to substantial tax savings, yet the relief often goes underclaimed or misunderstood.
Why Capital Allowances Matter
This tax relief is designed to encourage exactly the kind of forward-looking investment engineering businesses are known for – whether that’s a factory fit-out, a new production facility, or upgrading building services. Qualifying costs aren’t just limited to obvious assets like plant or machinery. In many cases, elements such as mechanical & electrical installations in a commercial property can also be eligible.
However, identifying these costs – and understanding what qualifies under the complex legislation – requires more than a surface-level assessment. That’s where specialist insight makes a meaningful difference.
The Challenge with Complex Projects
For accountants and finance teams, standard items like office equipment or IT may be relatively straightforward to claim. But for large-scale engineering projects, the detail often lies in the construction contracts, fit-out plans, or embedded building elements that aren’t always itemised clearly for tax purposes.
That doesn’t mean the opportunity is lost. With the right expertise – including technical surveying, costing, and tax legislation knowledge – it’s often possible to retrospectively identify, value, and claim for these assets. Even where cost breakdowns are incomplete or unavailable, qualified specialists can assess the asset base and estimate qualifying expenditure using industry benchmarks.
What If the Work Was Completed Years Ago?
Another common misconception is that it’s ‘too late’ to make a claim. But if your business still owns the asset, Capital Allowances can still be included in open tax returns. In some cases, they may even trigger a refund or tax credit.
How to Approach a Capital Allowances Review
If your business has undertaken any of the following in recent years, it could be worth exploring:
- Property purchase or construction
- Major refurbishment or redevelopment
- Office or factory fit-out
- Upgrades to power, lighting, HVAC, or other infrastructure
- Installation of new plant, machinery, or technical equipment
A robust review will typically involve:
- Scoping the eligibility of the project
- Reviewing construction and cost information
- Visiting the site where necessary
- Identifying and valuing qualifying expenditure
- Preparing supporting documentation for your tax return
For businesses in the engineering sector, where technical investment is a constant, the potential value of Capital Allowances should not be underestimated. Even a modest review can uncover missed relief and help improve cash flow – especially in a sector where reinvestment is key.
If you’d like to discuss this further or arrange a no-obligation review, our team of quantity surveyors, legal and tax professionals are here to help. Contact Strategic Partnerships Manager Sarah Glanville at sglanville@leyton.com to organise a chat with the team.
