What Are Integral Features for Capital Allowances?
If you own or lease a commercial property in the UK, you can claim capital allowances on the building services that make it functional. These are called integral features. They cover the systems that heat, cool, light, power, and move people around a building.
The rules sit in Part 2, Chapter 14 of the Capital Allowances Act 2001. They were introduced to replace the old industrial buildings allowances regime and to give clearer treatment for the mechanical and electrical installations in a property.
Integral features are treated as plant and machinery for capital allowances purposes. That means you can claim writing down allowances on them at a rate of 25% per year on a reducing balance basis. For a limited company, that relief reduces your corporation tax bill. For a sole trader or partnership, it reduces your income tax or partnership tax liability.
What Counts as an Integral Feature?
The legislation lists eight specific categories. If an item falls into one of these, it qualifies as an integral feature. If it does not, it may still qualify as general plant and machinery (at 18% or 6% rates) or as a structure and buildings allowance (3% straight line).
The eight categories are:
- An electrical system including lighting, power sockets, and switchgear. This covers the full electrical installation from the incoming supply to the final outlets.
- A cold water system including pipes, tanks, and pumps that supply water to the building.
- A hot water system including boilers, calorifiers, and distribution pipework.
- A space heating or cooling system including radiators, underfloor heating, air conditioning units, chillers, and fan coil units.
- A ventilation system including ductwork, fans, and air handling units.
- A lift, escalator, or moving walkway including the motor, control systems, and the car or steps.
- External solar shading including louvres, brise soleil, and shading fins fixed to the building exterior.
- A hot water system that also provides heating (this overlaps with the hot water and space heating categories but is listed separately for clarity).
If you install a new air conditioning system in a Manchester office block, that is an integral feature. If you replace the lighting in a Birmingham retail unit, that is an integral feature. If you add a passenger lift to a Leeds city centre serviced office, that is an integral feature.
What Does Not Qualify as an Integral Feature?
Some items look like they should qualify but do not. The legislation specifically excludes:
- Gas supply systems and pipework for gas-fired appliances (these are general plant and machinery at 18%).
- Drainage systems and sewerage pipework (these are structures and buildings allowances at 3%).
- Fire alarm systems and security systems (these are general plant and machinery at 18%).
- Data cabling and telecoms infrastructure (general plant and machinery at 18%).
- Sanitary ware such as toilets, sinks, and showers (these are structures and buildings allowances at 3%).
The distinction matters because the rate of relief differs. Claiming an item at 25% when it should be at 3% or 18% will be corrected by HMRC on enquiry. Getting it wrong can mean repaying relief plus interest and penalties.
What Rate of Relief Applies?
Integral features qualify for writing down allowances at 25% per year on a reducing balance basis. That means you claim 25% of the remaining tax written down value each year, not 25% of the original cost.
Here is a worked example. You spend £80,000 on a new heating and ventilation system for a Sheffield workshop. In year one, you claim 25% of £80,000 = £20,000. The remaining tax value is £60,000. In year two, you claim 25% of £60,000 = £15,000. The remaining value is £45,000. And so on.
For a limited company paying corporation tax at 19% or 25%, the tax saved in year one on that £20,000 claim is between £3,800 and £5,000. Over the life of the asset, the total relief equals the original cost, just spread over many years.
You can also claim a first year allowance (FYA) on certain energy-saving or water-efficient integral features. The FYA gives 100% relief in the year of purchase. The list of qualifying technologies changes periodically, so check HMRC's Energy Technology List before assuming FYA applies.
Can You Claim on Second-Hand Properties?
Yes, but the calculation is different. When you buy a second-hand commercial property, you cannot simply claim on the vendor's original cost. You need to apportion the purchase price between the building itself and the integral features within it.
The apportionment should be based on the market value of the integral features at the date you acquired the property. That is not the same as the vendor's original cost or the vendor's tax written down value. You need a valuation, typically from a quantity surveyor or a capital allowances specialist.
Once you have the apportioned value, you claim writing down allowances on that amount from the date of acquisition. The rate is still 25% reducing balance.
If the vendor claimed capital allowances on the same integral features before you bought the property, the disposal value rules apply. The vendor must bring a balancing charge into account equal to the lower of the original cost and the proceeds received for those features. As the buyer, you get a new pool of expenditure at the apportioned value.
How Do You Claim Integral Features Capital Allowances?
You claim capital allowances in your tax return. For a limited company, that is the CT600 corporation tax return. For a sole trader or partnership, it is the SA100 self assessment return with the relevant supplementary pages.
You need to maintain a capital allowances pool that tracks the tax written down value of your integral features. Most accounting software packages handle this, but you should check that the pool is set up correctly. Xero and FreeAgent both have fixed asset registers that can manage capital allowances pools. Sage 50 has a more detailed capital allowances module.
If you are claiming for the first time, or if you have acquired a property and need to apportion the purchase price, it is worth getting professional help. As ICAEW qualified accountants, we see claims that are either too aggressive (claiming on items that do not qualify) or too conservative (missing legitimate claims). Both cost you money.
You can find more detail on how capital allowances interact with your overall tax position on our services page.
What About the Annual Investment Allowance?
The Annual Investment Allowance (AIA) gives 100% relief on most plant and machinery expenditure up to £1,000,000 per year. Integral features qualify for the AIA, but there is a catch.
The AIA applies to integral features only if they are new and unused. If you buy a second-hand property and apportion value to the integral features, those features are not new. They do not qualify for the AIA. You must use the 25% reducing balance pool instead.
If you install new integral features into an existing property you already own, those new features are new and unused. They qualify for the AIA, provided you have not already used your £1,000,000 annual limit on other plant and machinery.
Full expensing (the 100% first year relief available to limited companies on most main rate plant and machinery) does not apply to integral features. Integral features are special rate pool expenditure, not main rate. So full expensing is not available for them.
Integral Features and the Special Rate Pool
Integral features sit in the special rate pool. That pool also includes long life assets (assets with an expected useful life of 25 years or more), thermal insulation, and cars with CO2 emissions above 50g/km.
The special rate pool has its own rules. You claim writing down allowances at 25% reducing balance on the pool as a whole. If the pool balance is £1,000 or less at the end of the accounting period, you can claim the whole balance as a small pool allowance.
You cannot transfer integral features out of the special rate pool into the main pool. They stay there for the life of the asset.
Common Mistakes We See
The most common mistake is claiming integral features at the 18% main rate instead of the 25% special rate. That sounds like a good thing (higher relief), but it is wrong. If HMRC enquires into your return, they will adjust the claim and may charge interest on the underpaid tax.
The second most common mistake is failing to identify integral features at all. Many property owners claim only on visible plant like boilers and air conditioning units but miss the electrical systems, lifts, and ventilation ductwork. Those are often the largest value items.
The third mistake is using the wrong valuation basis on acquisition. Some buyers simply use the vendor's original cost. That is not correct. You need a market value apportionment at the date you bought the property.
If you are unsure whether your claim is correct, our contact page is the best place to start a conversation.
Integral Features vs Structures and Buildings Allowance
Structures and Buildings Allowance (SBA) gives 3% straight line relief on the cost of the building itself. That includes the structure, the roof, the walls, the floors, and the foundations. It also includes items like drainage, sanitary ware, and fire escapes.
Integral features are separate from the building structure. They are the systems that make the building usable. The distinction can be subtle. A light fitting is an integral feature. The ceiling it is mounted in is SBA. A radiator is an integral feature. The wall it is fixed to is SBA.
When you buy a property, you should apportion the purchase price across three categories: land (no relief), building structure (3% SBA), and integral features (25% reducing balance). Getting the split right is where specialist advice adds value.
Our fundamentals page covers the basics of capital allowances and how they fit into your wider tax planning.
Practical Steps for Property Owners
If you own a commercial property and have not claimed integral features capital allowances, here is what to do:
- Identify all integral features in the property. Walk through with a quantity surveyor or use a capital allowances specialist.
- Value them. For new installations, use the actual cost. For acquisitions, use a market value apportionment.
- Set up a special rate pool in your fixed asset register or accounting software.
- Claim the writing down allowance in your tax return each year.
- Keep records of the costs, valuations, and calculations in case HMRC enquires.
If you are planning a refurbishment or new build, factor integral features into your budget from the start. The tax relief is a real cash flow benefit. A £100,000 spend on integral features generates £25,000 of tax relief in year one for a company paying 25% corporation tax.
For a full breakdown of how capital allowances interact with your specific business structure, visit our services page or speak to one of our team.