Mezzanine floor capital allowances: what may qualify

How capital allowances may apply to a mezzanine floor

A mezzanine floor may attract tax relief in two different ways, depending on what each part of the cost pays for. Items that count as plant and machinery could use plant and machinery allowances, while construction and fitting out work on the structure may fall under the structures and buildings allowance (SBA). The SBA cannot be claimed on costs which also qualify for plant and machinery allowances, and some costs, such as those for a residence or costs already used to claim another allowance, may qualify for neither route. ^[1]

Whether a particular installation may qualify for capital allowances depends on what was bought, who paid for it and how the space is used. Splitting the invoice into its separate parts helps identify what could be claimed under each route.

The general guidance does not set out how a mezzanine floor itself is treated, so each line of the invoice is worth checking separately. Lighting systems, electrical systems and lifts are listed as integral features, which go in the special rate pool. ^[2] Costs such as land, planning permission or financing, and costs that also qualify for plant and machinery allowances, cannot be claimed under the structures and buildings allowance.

Parts of the installation that may count as plant

Plant and machinery covers items kept for use in the business, such as equipment and machinery. It also includes alterations to a building to install plant or machinery, but this does not include repairs.

Some services fitted alongside a mezzanine may be integral features. Electrical systems, including lighting systems, are integral features, as are lifts, and integral features go in the special rate pool, which has a writing down allowance rate of 6%. ^[2]

Power and lighting run to the upper level, or a goods lift serving it, could therefore be treated as integral features rather than as part of the structure.

What the structures and buildings allowance covers in a fit-out

The SBA can only be claimed on construction costs, which include fees for design, preparing the site for construction, construction works, renovation, repair and conversion costs, and fitting out works. The extracts set out general categories rather than classifying a mezzanine floor itself, so whether the design fees and the build could fall under the structures and buildings allowance depends on an assessment of the actual installation, unlike lighting, electrical systems and lifts, which are expressly listed as integral features. It cannot be claimed on costs for other items included in the price of the structure, such as land, integral features and fixtures, or on costs for planning permission or for financing, such as loans.

All construction contracts must have been signed on or after 29 October 2018, and the structure must be used for a qualifying activity, have an allowance statement and not have been used as a residence the first time it was used or during the period being claimed for. Qualifying activities include trades, professions and vocations, and the activity must be taxable in the UK.

For Corporation Tax the rate is 2% from 29 October 2018 to 31 March 2020 and 3% from 1 April 2020 onwards; for Income Tax it is 2% from 29 October 2018 to 5 April 2020 and 3% from 6 April 2020 onwards. The allowance period is 33 and one third years from the later of the date the building is first used for a non-residential purpose and the date the qualifying expenditure is incurred.

Claiming the structures and buildings allowance may also increase the tax payable on a sale, because the total amount claimed must be added to disposal receipts to calculate the capital gain or loss.

Can I claim capital allowances on leasehold improvements?

A tenant that pays for a mezzanine in rented premises may be able to claim. Plant and machinery allowances can be claimed whether the business rents or owns the building, but only the person who bought the item can claim. ^[3]

A business that builds or renovates a structure can claim the SBA on the amount it spent on construction costs, even if it leases the structure from somebody else, but if it paid over the market value it can only claim for the original market value.

Repairs to an existing floor are treated differently: they are claimed as business expenses by a sole trader or partnership, or deducted from profits as a business cost by a limited company.

Allowances that may apply to the plant elements of a mezzanine

A company may be able to claim full expensing or the 50% first-year allowance if it is subject to Corporation Tax and incurred the expenditure on or after 1 April 2023, and the item must be new and unused and must not be a gift, a car, bought to lease to someone else (unless it is background plant or machinery within a building) or purchased in the accounting period the business activity ceases. ^[4] For main rate plant or machinery, all of the cost can be deducted under full expensing; for special rate plant or machinery, half of the cost can be deducted under the 50% first-year allowance, with the balance added to the special rate pool in the following accounting period.

Writing down allowances can be claimed if the plant and machinery does not qualify for another allowance, or if there is value remaining after claiming the maximum amount of another allowance. The main pool rate is 14% from April 2026 and 18% before, changing on 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax, and the special rate pool rate is 6%; an accounting period that includes the change day needs a hybrid rate.

Where expenditure qualifies for more than one type of plant and machinery allowance, the business can choose which to claim, but cannot claim more than one on the same amount of expenditure. ^[5] Expenditure on special rate plant or machinery may instead qualify for the annual investment allowance, and the guide to the Annual Investment Allowance covers that allowance in detail.

Records behind a claim for the structure

Claims for the SBA are made on the tax return, and an allowance statement is needed for the structure. If the business is the first person to use the structure, it must create a written allowance statement before it can make a claim. The statement must include information to identify the structure, the date of the earliest written contract for construction, the total qualifying costs and the date the business started using the structure for a non-residential activity.

For extensions or renovations completed after the business started using the structure, separate construction costs can be recorded on the allowance statement, or a new allowance statement can be created, which may suit a mezzanine added later. Information about the earliest construction contracts is kept in the records, and formal contracts, emails or board meeting notes can be used.