+44 (0) 20 7329 1300

Capital Allowances & Data Centres

Substantial capital allowances are available on the construction of data centres.   Up to 90% of expenditure on new build date centres, or higher, can potentially qualify for capital allowances.   The reason for this high level of allowances is that the buildings are normally quite simple enclosures containing vast amounts of mechanical and electrical plant.


Types of allowances


There are two main categories of capital allowances – general pool and special rate pool.  General pool includes fire alarms, computer equipment and sanitary ware and has a writing down allowance of 18%.  The special rate pool includes heating, air conditioning, electrics and hot and cold water systems.


Conversion of a building into a data centre


Converting an existing building into a data centre is likely to result in a high proportion of expenditure qualifying for capital allowances. This is because a data centre usually requires a high level of spend on air conditioning, UPS, generators, security, gas suppression system, cabling and of course IT equipment.


From our recent experience of data centres we estimate that circa 80% to 90% of the expenditure will qualify for capital allowances.


Enhanced Capital Allowances (ECA)


There may be scope for 100% allowances on certain energy efficient items including UPS (uninterrupted power supplies), CRAC units (Computer Room Air Conditioning), fire suppression systems, lighting and air conditioning, and for water saving plant including low flow taps.   ECAs  enable  you  to  claim  100%  first  year  capital  allowances  on  your expenditure on qualifying plant and machinery.  This means the tax savings are all available in the first year.  These assets would otherwise attract the lower writing down allowance at 8% per annum.   For an item to qualify for ECAs it needs to be on the ECA list before you purchase the product.  The lists can be found at: http://etl.decc.gov.uk/etl and http://www.watertechnologylist.co.uk/


Lighting is not on the list and instead has to meet a certain specification.  A capital allowances specialist can advise which plant items will qualify for ECAs during the design stage and influence specifications rather than reviewing the project on completion and finding that no ECA items were specified by the designers.  Early involvement will enable specialists to liaise with the construction project team and maximise on an ECA claim.


Mains Connections


There can be very substantial costs for these buildings for connecting to the grid for an electrical connection. Claiming capital allowances on these costs needs to be carefully considered and documented.


Data Centres and Business Premises Renovation Allowance


For existing buildings which are converted to data centres it may be possible to structure these depending on the location geography to benefit from 100% capital allowances on the conversion costs with all allowances being available in the first year.  It will be worth considering if this is feasible.


Contaminated Land


150% tax reliefs are available for expenditure incurred on cleaning up existing sites or converting existing properties.  This specific tax relief is only available to UK companies that are incurring the expenditure.  This tax relief applies to both investors and developers but does not apply to individuals or offshore investors.


For a site which has £1m of this type of expenditure, it can create a tax shelter to an investor or occupier of £1.5m.  Incidental costs like fees and contractors overheads can also be included which may increase the claim further.




Where existing buildings converted to data centres, there may also be an opportunity to claim some of the works as repairs.  For example expenditure on redecoration, window and roof repairs is often not nicely segregated.  A specialist can carefully segregate to exclude improvement expenditure.  There could be 10% or more expenditure that qualifies as repairs.  It is important for repairs to consider the accounting treatment at an early stage.

Back to News


agricultural-agriculture-asia-226621 (1)

Capital Allowances: HMRC Clutching Straws on a Grain Storage Structure

Lovell Breakfast Seminar March - June 2019

New Capital Allowances CPD Seminar Dates

kirsty 1

MBL Webinar – Capital Allowances in Hospitality


Lovell Consulting Commentary on November 2018 Budget: Capital Allowances Changes


Capital Allowances Prevent Nightmare Tax Levels


Capital Allowances Plant and Machinery in a Civil Engineering Context

Ho Ho

Lovell Consulting Capital Allowances Student Prize Winner 2018

The Lazarus Impact – Making Very Late Capital Allowances Claims

OTS – Report on Proposed Capital Allowances Simplification

Capital Allowances within Commercial Sale and Purchase Contracts


OTS Review on Capital Allowances and Accounts Depreciation


20 Years of Capital Allowances


Lovell Consulting Capital Allowances Student Prize Winner 2017

Pension Funds and Capital Allowances Interactions


Lexis Nexis Webinar – Capital Allowances in 2017

Capital Allowances and Demountable Partitions; To Move or Not to Move?

Employees Claiming Capital Allowances: Caravan Case Demonstrates Hurdles!

Capital Allowances, Corporation Tax Loss Relief & Interest Deductions – Act Now

Corporation Tax Loss Relief & Interest Deductions: Capital Allowances

Capital Allowances, Trustees and Tax Havens


Interview: A Little Capital Allowances Knowledge Can Be Dangerous

MBL Seminar Dates Announced (Capital Allowances in Retail, Hospitality & Offices)


2016 Lovell Consulting Capital Allowances Art Prize Voting Begins

Capital Allowances in the Retail Sector

Free Cash, Tax Savings & Capital Allowances for SMEs Going Green

Student Accommodation & Capital Allowances


Lovell Consulting Capital Allowances Student Prize Winner 2016

Capital Allowances within Offices

MBL Webinar

MBL Webinar – Capital Allowances for Property Surveyors

Tax Journal Interview: One minute with…John Lovell, Capital Allowances Specialist

Claiming Capital Allowances and / or Repairs

Commercial Property Standard Enquiries: Capital Allowances

New Picture (54)

LexisNexis Webinar – Tax for General Practice & Capital Allowances

Artful Plant: When Capital Allowances may be Claimed on a Painting

New Picture (44)

LexisNexis Webinar – Commercial Property Law & Capital Allowances


New Capital Allowances Team Appointment – Glenn Ramos

New Picture (48)

MBL Webinar for Property Lawyers and Tax Advisers (Capital Allowances)

Fundamental Changes to Interest Deductions & Impact for Capital Allowances

Capital Allowances within Childcare Facilities & Schools

John Lovell Comments: 2016 Budget – Impact on Capital Allowances: Commercial Property

Capital Allowances Team Announcements

Better Call Lovell for Capital Allowances


Lovell Consulting Capital Allowances 2015 Art Prize


LexisNexis Capital Allowances Webinar with John Lovell & Ronak Shah

Plant in Garden Centres: Claiming the Right Kind for Capital Allowances

Can an Accountant Claim the Capital Allowances without Specialist Support ?

John Lovell Capital Allowances talk at Chartered Institute of Taxation Conference

Enterprise Zones & Capital Allowances

Capital Allowances & Landlord Contributions to Tenant Fitting Out Works

10 Key Qualities To Look For In A Capital Allowances Advisor

Capital Allowances within Private Member Clubs

Effective Dealing with HMRC for Capital Allowances

Taxation Feedback Article

Taxation Feedback: Capital Allowances

Capital Allowances within Restaurants

Capital Allowances within Nursing Homes

Little Book

Little Book of Big Capital Allowances Savings

Real Estate Investment Trusts: Get The REIT Advice on Capital Allowances

Wind Turbines and Capital Allowances

Contaminated Land – The Big Clean Up for Capital Allowances

New Picture (20)

Capital Allowances & Furnished Holiday Lets

Capital Allowances Hidden Gems within Hotels

Helpful Tips for Claiming Capital Allowances in Tax Returns

Why Do I Need A Capital Allowances Specialist?

Land Remediation Relief & Capital Allowances Q&A

Inspired Capital Allowances Savings_Page_1

Inspired Capital Allowances Savings

Private Rented Sector (PRS) & Capital Allowances: Key Planning Points

Drafting For Purchase Contracts And CPSE Capital Allowances Responses

Lovell Consulting Capital Allowances Student Prize Winner 2015

Summer Budget 2015: Property Tax Updates & Impact for Capital Allowances

The Benefits of Claiming Annual Investment Allowances


Lawyers Should Seek Specialist Capital Allowances Advice


The New Environment For Capital Allowances

Capital Allowances – Demolition Costs

Capital Allowances – Asbestos Removal

Capital Allowances Case Summary: Bowerswood House Retirement Home

Property Tax Case Summary: Terrace Hill (Berkeley) Ltd: Impact for Capital Allowances

Business Premises Renovation Allowance (BPRA) Case Summary: Senex Investments

Construction Expenditure image

Capital Allowances Savings for Construction Expenditure

Recent Capital Allowances Case Study

Capital Allowances Case Summary – Rogate Services

Lovell Consulting Capital Allowances Student Prize Winner

Capital Allowances Case Summary – LLPs and AIA

Kirsty and Mike 2

New Capital Allowances Team Members

See Saw 2-10 (2)

Lovell Consulting Capital Allowances 2014 Art Prize


Recent Lovell Consulting Press Coverage: Capital Allowances


April 2014 Capital Allowances Fixtures Rules

The Budget of 19 March 2014 Announced a Number of Capital Allowances Changes


Capital Allowances Case Update – The Granleys

Holiday Lets 2

Capital Allowances on Furnished Holiday Lets

Capital Allowances Case Update – Wetherspoon

The Budget of 23 March 2012 Announced a Number of Capital Allowances Changes