Capital Allowances

Qualifying commercial property includes Furnished Holiday Lets (FHLs). Capital Allowances can be claimed when buying or developing existing freehold properties, constructing new properties or developing leasehold properties. Only commercial property which is purchased or leased by an individual or business will qualify. Property held in a pension fund or owned by a charity will not.

A FHL is a furnished property located in the UK or European Economic Area (EEA) that is available for holiday lets on a commercial basis for at least 210 days per year and is actually let for at least 105 days per year. The total periods of longer term occupation, or letting to the same person for more than 31 continuous days, must not exceed 155 days during the year.

The Plant & Machinery within FHLs can include fixtures and fitting as well as moveable items like furniture. More integral fixtures can include carpets, air conditioning, swimming pools, sanitary ware, kitchens, heating, emergency lighting, fire equipment, security systems and telecommunications. The list is lengthy and unfortunately there is no definition of what constitutes Plant & Machinery. However, there is a functional test – the asset must be used in the qualifying activity

Real Savings

By using the latest Quantity Surveying techniques, as approved by HMRC, along with the Accounting knowledge required, we can typically identify Plant & Machinery assets within a traditional FHL 20%-35% of the purchase price. This gives you tax deductible allowances against any income stream.

Remember that Capital Allowances can be claimed against any taxable income the owners have as well as the profits of your property portfolio.

Plant & Machinery Capital Allowances are effectively treated as an expense of the business. If you have purchased property after 6th April 2008, this whole amount can be offset against taxable income using the AIA (Annual Investment Allowances) legislation. AIA legislation states that up to £50,000 of allowances in 2008/09, and £100,000 for 2009/10 and 2010/11 may be used as a deductible business expense. Any balance over this amount, will be part of the ‘general pool’ of assets, and written down at 20%. Individuals who have other sources of income, and incur PAYE deductions can claim AIA and/or Capital Allowances on the property using ICTA1988 s380. These allowances can be claimed against your overall tax position, and in many cases, wipe out any tax you have paid. A refund will need to be applied for in some circumstances. However, pre 6th April 2008, HMRC will not allow you to use all of this allowance at once. There are rules which govern the rate of usage of the allowance.

We work WITH your accountant to ensure that Capital Allowances are claimed in the most efficient way.

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