Q – What are Capital Allowances?
A – Capital Allowances have been around since 1878, and is a tax relief relating to certain items within Holiday Let properties, which you can claim against your business profits. These items are known as Plant & Machinery and are valued buy specialist like us, to be used in your tax return.
Q. Will claiming Capital allowances have an effect on my CGT position, should I sell my property?
A -NO, It is a common myth that claiming Capital Allowances somehow ‘reduces’ your net purchase price, therefore increasing the differential between this and the sale price, Increasing your Capital Gains Tax liability. This is a misnomer.
The tax legislation and published HM Revenue guidance are very clear that capital allowances will not increase a capital gain.
Q. How far back can I claim?
A – Changes within 12 months
If you make a mistake on a tax return you’ve got 12 months from 31 January after the end of the tax year to correct it. This is called an ‘amendment’. For example, for the 2017-18 return you have until 31 January 2020 to make an amendment, that is 12 months after 31 January following the end of the tax year.
If as a result of your amendment you are due a tax rebate (repayment), tell HMRC how you’d like to receive it.
B – Changes dating back more than one year
There are special rules if you want to tell HMRC about an adjustment and/or claim a repayment when it’s too late to make an amendment.
We will be pleased to manage this for you, or assist your accountant with any questions they may have.
If you’ve paid too much tax because of a mistake made by HMRC you can get extra time to claim.
Q. What is a Furnished Holiday Letting property?
A – Is any property which is:-
- available for holiday letting to the public on a commercial basis for 210 days or more, and
- let commercially for 105 days or more, and
- let for periods of longer-term occupation (more than 31 consecutive days) for not more than 155 days during the year.
- Located in the UK or European Economic Area
This means an FHL could be, amongst other things:
- Single / multi bed apartments
- Villas
- Holiday Houses
- Flats
Q. My accountant should have claimed these allowances already?
Your accountant will probably have claimed Capital Allowances for the assets which you have purchased since the original investment. Items such as fire alarm installations, emergency lighting and intruder alarms are prime examples of these items which your accountant should claim for. However, it is a most complex area of taxation, and unless you have had a specific Plant & Machinery survey on your property, then your accountant will not have identified the inherent Plant & machinery within your property. Please note, that we work with your accountant, to maximise your tax claim.