Curtis Plumstone https://www.curtisplumstone.com Capital Allowances Claims on Commercial Property Expenditure Tue, 10 Jul 2018 10:16:48 +0000 en-GB hourly 1 https://wordpress.org/?v=4.9.8 Dementia Care & Nursing Home Exhibition 2018 https://www.curtisplumstone.com/dementia-care-nursing-home-exhibition-2018/ https://www.curtisplumstone.com/dementia-care-nursing-home-exhibition-2018/#respond Wed, 18 Apr 2018 09:44:19 +0000 http://www.curtisplumstone.com/?p=5892 Capital Allowances Claims for Care and Nursing Homes On the 25th and 26th April 2018 we will be exhibiting at the Dementia Care & Nursing Home Exhibition at the NEC Birmingham. I have previously written about the tremendous tax relief benefits which can be obtained by property owners in this sector. If you are interested […]

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Capital Allowances Claims for Care and Nursing Homes

On the 25th and 26th April 2018 we will be exhibiting at the Dementia Care & Nursing Home Exhibition at the NEC Birmingham. I have previously written about the tremendous tax relief benefits which can be obtained by property owners in this sector. If you are interested in the potential for a capital allowances claim on a care or nursing home please see my previous blog on the subject here.

If you are attending the exhibition and would like to talk to us then we will be on Stand 8082. It will be great to meet people and have the chance to explore what the tax relief possibilities might be for property owners.

Capital Allowances Claims Presentation

Also I have been asked to give a thirty minute presentation on the subject of Capital Allowances Claims for Care & Nursing Homes. This will take place in Lecture Theatre 13 at 14.45 on April 25th 2018. It will be an opportunity for you to explore whether you could benefit from the services of a Capital Allowances Claims Specialist such as ourselves but I promise it will not be a sales pitch and will hopefully be educational without getting too technical.

If you are interested in obtaining free tickets to the show or just want to explore the website dedicated to the exhibition then please click on the banner below for more information. We look forward to seeing you on either day.

For further details about the exhibition the website can be accessed by clicking here

 

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Capital Allowances Claims – Choosing the Right Specialists https://www.curtisplumstone.com/capital-alllowances-claims-specialists/ https://www.curtisplumstone.com/capital-alllowances-claims-specialists/#respond Tue, 09 Feb 2016 11:39:50 +0000 http://www.curtisplumstone.com/?p=5230 Buyer Beware Over the past few years there has been a steady increase in firms offering capital allowances claims services in respect of commercial property expenditure. Given the wide variety of suppliers of these services it is important for the potential client to understand that not all suppliers may have your best interests at heart. […]

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Buyer Beware

Over the past few years there has been a steady increase in firms offering capital allowances claims services in respect of commercial property expenditure. Given the wide variety of suppliers of these services it is important for the potential client to understand that not all suppliers may have your best interests at heart.

Marketing Led Firms

There has been a rapid increase in the number of websites offering capital allowances services. We have frequently been contacted by accountants, solicitors and business owners who are seeking a second opinion. In many cases the information they have been given by another provider is at the best misleading and in the worse cases just plain incorrect. Having now had numerous conversations with business owners and their professional advisers we have become aware of several re-occurring themes which we think potential clients need to consider.

Overstating Potential Claims

In estimating the potential for a capital allowances claim we have come across firms who have overstated the potential capital allowances which may be available. In doing so, the customer is lured into engaging the company believing that their expertise must be greater than all other firms who have given realistic estimates. Of course when the resultant claim is produced it is far less than the original estimate but by that time the client is committed to paying the resultant fees.

We have even come across examples where clients have been persuaded to make a capital allowances claim where there was potentially little benefit in them doing e.g where they had little or no tax liability. In one case we were contacted by a business owner who had been persuaded to a make a claim which was of no benefit to them and was subsequently sued by the capital allowances company for non-payment of their invoice.

Uncompetitive Fees

Although a capital allowances claim can have a long term benefit to a business it is important that the payment of fees does not disrupt the businesses cash flow. We have seen fees quoted by other companies which would leave business owners out of pocket for one if not two years.

In contrast we ensure our fees are tailored to the client’s circumstances and that they will see a financial benefit in both the short and long term. In some cases we have had to tell clients that, in their circumstances, it is not in their best interests to make a capital allowances claim. That is to say they should wait to see if their circumstances change which may mean a claim is possible in the future. We believe this is the only approach which should be taken as it establishes long term relationships and increases the reputation of our business over time.

Lack of Experience and Expertise

It is important that the capital allowances claims specialist you appoint has the necessary experience and expertise to undertake the work. If the specialist makes a mistake or basis their claim on incorrect principles then it is the client who will suffer if HMRC investigate their claim.

Some new suppliers in the capital allowances claims market appear to have no specialist experience and in many cases are working just as introducers to other firms. However specialists, like ourselves, generally come from professional tax, accountancy or surveying backgrounds (or a combination of these disciplines) and can therefore advise you on your commercial property expenditure tax relief.

Subcontracted Services

The last point to make here is that many firms do not actually directly employ the specialists who will undertake the capital allowances claims work. This means that in many instances the client does not know who will actually be undertaking the work and if they are qualified to do so. In contrast if you deal with us you will have a named contact who is a dedicated capital allowances specialist with all the required experience and knowledge required to deal with the complexities of compiling a capital allowances claim on your behalf.

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Capital Allowances & Guest Houses https://www.curtisplumstone.com/capital-allowances-claims-guesthouses/ https://www.curtisplumstone.com/capital-allowances-claims-guesthouses/#respond Mon, 25 Jan 2016 15:30:08 +0000 http://www.curtisplumstone.com/?p=5204 We suspect that Guest House and Bed & Breakfast owners are one of those groups who have generally failed to investigate making a capital allowances claim on the acquisition of their property. Claiming capital allowances on these types of property is relatively straight forward for specialists such as ourselves. The only challenge, if one could […]

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We suspect that Guest House and Bed & Breakfast owners are one of those groups who have generally failed to investigate making a capital allowances claim on the acquisition of their property. Claiming capital allowances on these types of property is relatively straight forward for specialists such as ourselves. The only challenge, if one could term it as such, being frequently the guest house is occupied by the owner’s family meaning this has to be taken into account when apportioning qualifying and non-qualifying assets i.e. the owners occupy their part of the building as a residential property.

The following information is given to try and persuade you as the Guest House/ B&B owner to take the next step and contact us for a free review of your potential claim.

The Legal Perspective:

When one is presented by a tax saving initiative it is natural to want to know whether what is being proposed is legal. The answer to this, for capital allowance claims is a definite yes.

Capital allowances legislation can be traced back to the 1870’s but the current legislation is The Capital Allowances Act 2001 which is amended annually by the Government of the day. Therefore capital allowances are a tax relief enshrined in statute.

What are Capital Allowances?

Capital Allowances can be claimed on any expenditure which brings into existence (or improves) an asset with an enduring benefit for the trade. The purpose of capital allowances is to protect the owner’s profits from taxation and therefore reduce their tax bill. If the property has been owned for more than one financial year then a tax rebate may well be due and less tax will be paid for many years to come.

How does this apply to commercial property including Guest Houses & B&Bs?

When you bought your property you probably weren’t aware that the fixtures / integral features within the property could be valued for capital allowances purposes. This may include electrical systems, heating systems, hot & cold water systems, kitchen equipment, sanitary ware and other items which support your trade. Your accountant may have valued what are termed the “loose chattels” such as furniture and carpets but these may represent a small percentage of what may be claimed. The good news is, that in most cases, there is no time limit for making a claim so you haven’t missed the boat even if you bought the property some years ago.

A Useful Example:

Let us take a guest house purchased in 2005 for £500,000 excluding goodwill and loose chattels claimed by the accountant. 10% of the property is used for the owner’s private accommodation. This effectively reduces the value of the property used for commercial purposes to £450,000. With this type of property it would not be uncommon to find that 25% of the purchase value may be claimed as capital allowances so £450,000 x 25% = £112,500. For a 20% tax payer this would equate to a tax saving over time of circa £23,000 or £46,000 for a 40% taxpayer.

Why hasn’t my accountant informed me about this?

This is the most common question asked and there is no one answer to this question. There are many misconceptions held by accountants which include:

i) making a capital allowances claim affects the amount of capital gains tax which may be payable on disposal of the property. This is untrue as capital allowances should in 99% of cases be excluded from any calculations in respect capital gains.

ii) the purchase contract contains values for fixtures and fittings which are binding.
This is not case  as these figures are not binding on the HMRC as capital allowances claims are governed by statute law rather than a purchase contract

iii) any tax advantages are clawed back on sale of the property. Again this is not normally the case as long as the seller is given the correct advice either by their current professional advisers or by contacting a specialist such as ourselves.

Lastly an accountant does not have the required taxation and surveying  skills required to undertake the valuation of the fixtures and integral features in a property. It’s a case of knowing exactly what may be claimed and how to value it based on HMRCs legislation and guidance.

What should I do if I want to investigate further?

The simplest advice we can give is to either contact  us via our main number of 02393 074515 or complete the Capital Allowances Free Review Form and submit it to us. We assure you that if a claim is possible and you use our services there will be no downside to your making a claim.

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Furnished Holday Lets – Capital Allowances https://www.curtisplumstone.com/fhls/ https://www.curtisplumstone.com/fhls/#respond Mon, 18 Jan 2016 12:58:32 +0000 http://www.curtisplumstone.com/?p=5200 The information in this blog is based on guidance taken from the HMRC’s website. However the reason that we are interested in talking to Furnished Holiday Let (FHL) owners is that in most cases they have not claimed for the “Fixtures” within their properties. i.e. assets such as the heating, electrical systems and sanitary ware […]

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The information in this blog is based on guidance taken from the HMRC’s website. However the reason that we are interested in talking to Furnished Holiday Let (FHL) owners is that in most cases they have not claimed for the “Fixtures” within their properties. i.e. assets such as the heating, electrical systems and sanitary ware etc.

As an example if you paid £400,000 for your FHL the capital allowances will be in the general region of £100,000 i.e. 25% of the original purchase cost. This would equate to a tax saving over time of £20,000 for a 20% tax payer or £40,000 for a 40% taxpayer.

Please complete our Free Review Form if you would like an estimate of your likely capital allowances benefits. There is no downside to making a claim if your paying sufficient tax on profits from your furnished holiday lets business.

Special Tax Rules for Furnished Holiday Lets

There are special tax rules for rental income from properties that qualify as Furnished Holiday Lettings (FHLs).

If you let properties that qualify as FHLs:

  • you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders)
  • you are entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures which would include such items as heating and electrical systems and sanitary ware.
  • the profits count as earnings for pension purposes

To benefit from these rules, you will need to work out the profit or loss from your FHLs separately from any other rental business.

Accommodation that qualifies as a FHL

To qualify as a FHL your property must be:

  • in the UK or in the European Economic Area (EEA) – the EEA includes Iceland, Liechtenstein and Norway
  • furnished – there must be sufficient furniture provided for normal occupation and your visitors must be entitled to use the furniture

The property must be commercially let in that you intend to make a profit. If you let the property out of season to cover costs but do not make a profit, the letting will still be treated as commercial.

All your FHLs in the UK are taxed as a single UK FHL business and all FHLs in other EEA states are taxed as a single EEA FHL business. You will need to keep separate records for each FHL business because the losses from one FHL business cannot be used against profits of the other.

Occupancy conditions

Accommodation can only qualify as a FHL if it passes all 3 occupancy conditions set out below.

How to use the occupancy conditions

  • for a continuing let, apply the tests to the tax year – that is from 6 April one year to the 5 April the next
  • for a new let, apply the tests to the first 12 months from when the letting began
  • when your letting stops, apply the tests to the 12 months up to when the letting finished

The pattern of occupation condition

If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition is not met so your property will not be an FHL for that year.

The availability condition

Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year (140 days for the tax year 2011 to 2012 and earlier).

Do not count any days when you are staying in the property. HM Revenue and Customs (HMRC) do not consider the property to be available for letting while you are staying there.

The letting condition

You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year.

Do not count any days when you let the property to friends or relatives at zero or reduced rates as this is not a commercial let.

Do not count longer-term lets of more than 31 days, unless the 31 days is exceeded because something unforeseen happens. For example, if the holidaymaker either:

  • falls ill or has an accident, and can’t leave on time
  • has to extend their holiday due to a delayed flight

If you don’t let your property for at least 105 days, you have 2 options (known as elections) that can help you reach the occupancy threshold:

  • the averaging election – if you have more than one property
  • a period of grace election – if your property reaches the occupancy threshold in some years but not in others

Averaging election

If you let more than one property as a FHL, and one or more of these properties does not meet the letting condition of 105 days, you can elect to apply the letting condition to the average rate of occupancy for all the properties you let as FHLs. This is called an averaging election.

Example

Gary lets 4 UK holiday cottages in 2014 to 2015 for the following number of days:

Cottage 1 120 days
Cottage 2 125 days
Cottage 3 112 days
Cottage 4 64 days
Total 421 days

If Gary uses averaging, all 4 cottages will meet the letting condition (421 days divided by 4 = 105). Without averaging, cottage 4 would not qualify.

You can only average across properties in a single FHL business – you can’t mix UK and EEA FHL properties together.

Time limit

You make an averaging election up to one year after 31 January following the end of the tax year. For example, if you are filling in your tax return for 2014 to 2015, you must make your election by 31 January 2017.

Period of grace election

You may genuinely intend to meet the letting condition, but were unable to. If this happens, you may be able to make a period of grace election that allows the property to qualify as a FHL as long as the pattern of occupation and availability conditions were met.

To make an election, you must be able to show that you had a genuine intention to let the property in the year. For example, where you have marketed a property to the same or a greater level than in successful years, or where the lettings are cancelled due to unforeseen circumstances, including extreme adverse weather.

You can make an election where the property met the letting condition in the year before the first year you wish to make a period of grace election (either on its own or because of an averaging election). If your property again doesn’t meet the letting condition in the following year, you can make a second period of grace election (as long as you made an election in the previous year).

If your property doesn’t reach the threshold by the fourth year, after 2 consecutive period of grace elections, it will no longer qualify as a furnished holiday letting.

How to make an election

You can either:

  • use your Self Assessment ‘UK Property’ pages
  • make it separately, up to one year after 31 January following the end of the tax year – for example, if you are filling in your tax return for 2014 to 2015 you must make your election by 31 January 2017

Using both averaging and period of grace

If you have more than one property, you can use both averaging and period of grace elections to make sure that a property continues to qualify as a FHL.

Example

Emma has 4 cottages that she lets as furnished holiday lettings. In some years cottage 3 doesn’t meet the letting condition.

Year 1 Year 2 Year 3 Year 4 Year 5
Cottage 1 Qualifies Qualifies Qualifies Qualifies Qualifies
Cottage 2 Qualifies Qualifies Qualifies Qualifies Qualifies
Cottage 3 Qualifies Averaging Period of grace Period of grace Qualifies
Cottage 4 Qualifies Qualifies Qualifies Qualifies Qualifies

Emma uses averaging in year 2 and period of grace in year 3 and 4 to make sure that cottage 3 qualifies for the whole period.

Property closed for part of the year or only part of the property let

If your property is only used as a FHL and is closed for part of the year because there are no customers, you can deduct all the expenses, such as insurance and loan interest, for the whole year, provided you do not live in the property.

If you let part of the property as a FHL, or where you use the property privately for part of the year, you need to apportion your receipts and expenses on a reasonable basis.

Property stops being an FHL

Your property will no longer be a FHL if the:

  • property is sold
  • property is used for private occupation
  • letting condition is not met even with the averaging and period of grace elections

If your property does not qualify as an FHL or stops being a qualifying FHL, the special tax treatment will no longer apply. You will need to work out any balancing allowance or balancing charge for capital allowances.

What you can do with losses

If your UK FHL business makes a loss, you can set the loss against your UK FHL profits of later years. Similarly, if your EEA FHL business makes a loss, you can set the loss against your EEA FHL profits of later years. You can’t set the losses of one FHL business against the profits of the other if you have a UK and an EEA business.

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Capital Allowances – You’ve Never Had it so Good! https://www.curtisplumstone.com/capital-allowances-youve-never-had-it-so-good/ https://www.curtisplumstone.com/capital-allowances-youve-never-had-it-so-good/#respond Thu, 28 May 2015 19:06:24 +0000 http://www.curtisplumstone.com/?p=5113 The Annual Investment Allowance (AIA) We have written at some length about the major changes to the capital allowances fixtures regime which came into full effect in April 2014. This has focused much attention on the risks now faced by buyers of commercial property, and their advisers, if they do not consider capital allowances during […]

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The Annual Investment Allowance (AIA)

We have written at some length about the major changes to the capital allowances fixtures regime which came into full effect in April 2014. This has focused much attention on the risks now faced by buyers of commercial property, and their advisers, if they do not consider capital allowances during the purchase transaction.

However there is also some good news for property buyers who can enjoy an unusually high level of tax relief for expenditure on fixtures incurred during 2015. The key is that the Annual Investment Allowance is set at £500,000 at least until the end of 2015. (Since writing this blog the AIA has been confirmed as £200,000 from 1st January 2016)

Why this is Good News

Currently if somebody acquires, or indeed builds, or redevelops a commercial property they may well be able to claim the capital allowances for expenditure on fixtures. This includes lifts, electrical systems, heating and even carpets to name but a few items.

With the Annual Investment set at £500,000 (£200,000 from 1st January 2016) this means that it may well be possible to claim up to this value of expenditure on fixtures as tax relief. For example a company or individual who undertakes an extensive refurbishment of a hotel may incur expenditure on fixtures of say £200,000. If this expenditure is incurred in 2015 then the total amount may be used to protect profits from taxation if claimed in the tax year the expenditure was incurred.

However, as things stand at the time of writing, the Annual Investment Allowance will return to its former level of £25,000 in January 2016 unless the current legislation is amended. This means, where possible, capital expenditure should be incurred before the end of December 2015 to maximise the available tax relief.

Think Ahead

If you are considering purchasing commercial property then obviously the availability of the Annual Investment Allowance is not the only consideration but it should be factored in to the decision making process. It also highlights even more the importance of establishing the capital allowances position prior to completion on a property. For example if two properties are being considered it may well be the case that a fixtures claim is possible on one property but not the other. This knowledge could be a deciding factor in purchasing a property which will afford the maximum tax relief in the future.

We wait to see whether the Government will maintain the current level of Annual Investment Allowance beyond 31st December 2015 but if they do it will certainly help the economy to keep on the path to recovery.  However we would encourage any prospective property buyer to consult with a specialist such as ourselves  see www.curtisplumstone.com as early as possible within the process or the opportunity may be lost to claim capital allowances on fixtures.

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Is there £60,000 locked in your Freezer? https://www.curtisplumstone.com/is-there-60000-locked-in-your-freezer/ https://www.curtisplumstone.com/is-there-60000-locked-in-your-freezer/#respond Wed, 20 May 2015 12:03:40 +0000 http://www.curtisplumstone.com/?p=5127 Capital Allowances Freezers This is a capital allowances case study for commercial property. Please do not waste time rushing to your kitchen to see if there is a wad of cash in the ice-box. Industrial freezers used in commercial properties are actually the subject of this capital allowances case study.  We recently completed a capital […]

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Capital Allowances Freezers

This is a capital allowances case study for commercial property. Please do not waste time rushing to your kitchen to see if there is a wad of cash in the ice-box. Industrial freezers used in commercial properties are actually the subject of this capital allowances case study.  We recently completed a capital allowances claim for a property in the North-West. The owners had constructed it themselves in 2007 i.e. it was a new build project.

The property had been constructed by a food distribution company at a cost of £2.1m . From the owners description we believed the property was a a fairly standard warehouse with offices. Therefore we estimated the capital allowances at approximately 15% of the build cost or circa £300,000. This still would have given a respectable tax saving of £60,000 over time.

Good News

However our survey revealed a large percentage of the property was occupied internally by a purpose built freezer. We concluded the construction cost of this freezer was claimable in its entirety i.e. it represented a piece of plant in its own right. In short this doubled our original pre-estimate for the property so that the final capital allowances claim came to circa £604k. Hence the title of this post as the freezer added an additional £60,000 tax saving over time.

So if you do have a large industrial freezer in your warehouse (or just have a warehouse) and you haven’t investigated the merits of a capital allowances claim then please feel free to contact us!!

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Capital Allowances & Carpets https://www.curtisplumstone.com/capital-allowances-carpets/ https://www.curtisplumstone.com/capital-allowances-carpets/#respond Sun, 18 Jan 2015 23:00:42 +0000 http://www.curtisplumstone.com/?p=5061 Do Carpets Qualify for Capital Allowances Purposes? The reason for making this post is this is one question which does seem to be asked quite frequently judging by the number of internet searches that Google receives on the subject. HMRC normally accepts both carpets and linoleum qualify for capital allowances as they are plant (see […]

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Do Carpets Qualify for Capital Allowances Purposes?

The reason for making this post is this is one question which does seem to be asked quite frequently judging by the number of internet searches that Google receives on the subject.

HMRC normally accepts both carpets and linoleum qualify for capital allowances as they are plant (see CA21200). The reference is slightly confusing as it does refer to carpets in the context of furniture but in practice carpets have always been accepted as being Plant.

As if to illustrate this point in the case of Anchor International Ltd v IR Commrs [2005] BTC 97 a huge synthetic carpet used for playing five-a-side football was held to be plant. However it should be noted that generally HMRC do not accept as plant, tiles which are stuck down. This does mean one grey area is that of stuck down carpet tiles which may be accepted by some HMRC Inspectors as qualifying but possibly not by others. The implication is that floor coverings which are permanently stuck down become part of the structure of the property and therefore do not qualify for capital allowances purposes.

Are you Missing the Bigger Picture?

You have obviously visited this page because you have or are planning to fit carpets in a building. However if you own the freehold of the building have you checked to see whether capital allowances have ever been claimed on the “plant & machinery fixtures in the property?”. This is where the majority of our work is concentrated because, it more often than not, produces large tax savings for our clients. If you own the freehold of a property or have a long leasehold then why not complete our “Free High Level Review Form” to ensure you are maximizing your property related tax relief.

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Section 198 (S198) Tax Election Template https://www.curtisplumstone.com/section-198-s198-election-template/ https://www.curtisplumstone.com/section-198-s198-election-template/#comments Thu, 18 Dec 2014 19:44:15 +0000 http://www.curtisplumstone.com/?p=5035 Free Section 198 Election Template for Download The statistics from our website show many people are searching for a CAA2001 Section 198 (S198) Tax Election Template so we have provided one here which may be downloaded. We would encourage anyone who wishes to use this template  to also read one of our previous blogs namely […]

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Free Section 198 Election Template for Download

The statistics from our website show many people are searching for a CAA2001 Section 198 (S198) Tax Election Template so we have provided one here which may be downloaded. We would encourage anyone who wishes to use this template  to also read one of our previous blogs namely Section 198/199 Elections. This goes into more detail about the appropriate use of this tax election.

As always, if you need any help in completing this template in relation to a specific case please contact us by either phoning 02392 696815 or e-mailing info@curtisplumstone.com

S198 Election under Capital Allowances Act 2001

S198 Tax Election Template

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Property Development & Refurbishment https://www.curtisplumstone.com/capital-allowances-property-development-refurbishment/ https://www.curtisplumstone.com/capital-allowances-property-development-refurbishment/#respond Mon, 27 Oct 2014 10:43:21 +0000 http://www.curtisplumstone.com/?p=4931 Maximising Capital Allowances on Development / Refurbishment Historically much of our capital allowances claims work has been on the purchase of second hand property.  However we are being engaged more and more to maximise the capital allowances claimed on the refurbishment and / or redevelopment of commercial property. For example, at the time of writing […]

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Maximising Capital Allowances on Development / Refurbishment

Historically much of our capital allowances claims work has been on the purchase of second hand property.  However we are being engaged more and more to maximise the capital allowances claimed on the refurbishment and / or redevelopment of commercial property. For example, at the time of writing we are undertaking a claim for the extensive refurbishment of a care home costing circa £350,000. The capital allowances claim on the original purchase of the property has already been completed so this is a new and additional claim. The capital allowances we are likely to be able to claim are in excess of £200,000 and as the owners are 40% tax payers in this case the tax benefit over time will be more than £80,000.

Why Make A Claim with a Specialist

Many property owners believe when they undertake improvements on their property their accountant will be able to analyse the invoices and extract the relevant capital allowances information. Unfortunately, although the accountant may be able to undertake this work, they rarely maximise the benefits of a claim. In many cases this is not the fault of the accountant but is due to two factors:-

a) The invoices are not detailed enough for the accountant to be able to analyse the qualifying from the non-qualifying expenditure

b) Due to the complexities of the legislation the accountant is, in many cases, unsure of what expenditure is claimable in the given circumstances.

I have had conversations with accountants in the past who have been honest enough to admit that they are only likely to be able to successfully claim 50% of any major refurbishment work. This can mean the client misses out  on substantial relief.

Why Making a Claim Can Be So Worthwhile

When a company or individual(s) purchase a second hand commercial property the potential capital allowances claim for qualifying “fixtures” is arrived at by the means of a “just and reasonable apportionment” exercise. The cost of a second hand purchase can be broken down into theree elements namely:-

a) The purchase cost of the land.

b) The purchase cost of non-qualifying elements.

c) The purchase cost of qualifying elements.

Typically for the purchase of a hotel, care home or office the “fixtures” which qualify for capital allowances represent circa 25% of the overall purchase price. However if money is then spent on refurbishment or redevelopment of the property then 40% plus of this expenditure is likely to qualify for capital allowances purposes. The reason being  the land has already been purchased and  therefore additional expenditure is split just between qualifying and non-qualifying elements.

Don’t Forget  the Annual Investment Allowance

The Annual Investment Allowance is currently set at £500,000 i.e. this level of capital allowances may be able to be claimed in any single financial period. However this is only possible where the relevant tax returns are open for amendment  This means it is important where qualifying expenditure is incurred on refurbishment of a property that the analysis for capital allowances purposes is undertaken soon after completion of the works. With bigger projects it may even be beneficial for the capital allowances analysis to be undertaken as the work is progressing especially if the project crosses over  financial periods.

This means from a tax perspective there has probably never been a better time to develop / refurbish commercial property provided the owners engage the services of a specialist such as ourselves to help them maximise their capital allowances claims.

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Capital Allowances – Care & Nursing Homes https://www.curtisplumstone.com/capital-allowances-claims-care-and-nursing-homes/ https://www.curtisplumstone.com/capital-allowances-claims-care-and-nursing-homes/#respond Fri, 25 Jul 2014 14:19:00 +0000 http://www.curtisplumstone.com/?p=4842 Capital Allowances Claims a must for Care & Nursing Home Owners In a previous blog post we pointed out how financially beneficial a capital allowances claim could be for Hotel owners. Much of the information supplied in this previous blog is also relevant to Care & Nursing Homes whether owned by individuals or larger limited […]

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Capital Allowances Claims a must for Care & Nursing Home Owners

In a previous blog post we pointed out how financially beneficial a capital allowances claim could be for Hotel owners. Much of the information supplied in this previous blog is also relevant to Care & Nursing Homes whether owned by individuals or larger limited companies.  This is because both Hotels and Care / Nursing Homes contain many of the same types of claimable “Plant & Machinery” for capital allowances purposes.

Care / Nursing Homes contain Plant

  • Lifts
  • Electrical Systems
  • Catering Equipment
  • Air-conditioning
  • Heating & Ventilation Systems
  • Sanitary equipment including toilets, baths and showers
  • Signs
  • Emergency Lighting
  • Telephone & Wi-Fi Systems
  • Fire detection equipment
  • Hot & cold water system

Additional Plant

In addition to many of the common items found in other commercial property care / nursing homes homes contain items which are not commonly found in other buildings. Some of these include:-

  • Emergency Call Systems
  • Medical Equipment and Systems
  • Electric Hoists and Bathing Aids
  • Reception Desks

Making a Capital Allowances Claim

As a general rule the level of capital allowances claimable for a care / nursing home will fall between 20% to 30% (possibly more) of the original purchase price of the property. Although if an extensive development or refurbishment work has been undertaken this percentage can increase dramatically when the costs of purchase and refurbishment are added together. We have successfully completed a number of recent claims on care and nursing homes where the original purchase prices have ranged from £400k to £2m. The results of some of these capital allowances claims are detailed on our case studies page. If you own a care or nursing home (or you have clients who do) then please contact us for a free high level review.

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