Furnished Holiday Lets (FHLs) and Capital Allowances (CAs) Claims on the Integral Plant and Machinery:
As covered in another of our blog posts, FHLs (whether situated in the UK or EU such as Spain, Portugal, France etc) are treated as trades for some tax purposes and therefore have some tax advantages over other property rentals/lettings. The advantages under the special FHL rules include the entitlement to plant and machinery capital allowances on ‘qualifying assets’. Qualifying assets don’t just include furniture such as table and chairs though!
FHL owners (and unfortunately their Accountants!) often don’t realise that it is possible to claim capital allowances on the plant & equipment contained within (i.e. integral to) the property. The property purchase price for tax purposes is actually made up of a) the land on which the property is situated b) the building (i.e. bricks and mortar) and c) the plant and machinery used within the building such as heating, plumbing, electrics, solar panels, cooker, baths, toilets etc. This latter element can often amount to between 10% to 35% of the cost of the property and capital allowances of up to 100% can be claimed on the element apportioned towards plant and machinery potentially resulting in a substantial income tax refund or reduced tax payment (although after the 2010/11 tax year a FHL loss cannot be set-off against other UK income but at least can be used to reduce future FHL profits).
Lions Accountants have dealt with capital allowances claims on Furnished Holiday Lets for clients by engaging a cost-effective surveyor to prepare a property report which is used as part of the detailed claim and calculations attached to the client’s tax return. After an insubstantial initial fee to cover the surveying cost, our competitive fee is payable only on successful processing of the tax claim thus making it easy for clients to receive the tax deduction they are due (by paying our fee only when they receive their tax refund/reduction).
FHL owners should consider their capital allowances position soon. HMRC have announced consultation in 2011 to implement a new specified period after the property purchase within which the capital allowances claim has to be made. Currently there is no time limit to start making your capital allowances claim – for example, we recently helped a client make a capital allowances claim starting from 2009/10 for a commercial property bought in 1999, over 10 years previously. That may change so that even if you would have been able to claim a tax deduction for capital allowances soon after purchase you may soon be time-barred in doing so (assuming the consultation results in new legislation). Why not ask Lions Accountants to review your situation now on a no-cost basis to ensure you’re not missing out on a valuable tax relief?