In recent years, the aparthotel market has seen significant growth, as the UK and world working practices evolve, so the short stay accommodation needs have changed. For those old enough to have seen numerous property cycles, they will recall hotel building allowances, but since their abolition the ability to attract tax relief has changed and we explore the relevance on the aparthotel market.
The first point to address, is to start by clarifying that an aparthotel will not typically be excluded from claiming capital allowances as a dwelling, given that the very nature of their business is to offer temporary accommodation, albeit that which is akin to a flat rather than a hotel room.
Once you have established that your property is to be operated in such a way, then it allows the investor to consider the possibility of claiming capital allowances on certain qualifying fixtures.
With the removal of hotel allowances, it requires a more forensic approach to determine which expenditure qualifies rather than being able to take the whole property as qualifying as you could before. The good news, however, is that by their very nature with a high proportion of useable space to core area, it means that there is a high proportion of the overall development value which will be able to attract tax relief by claiming capital allowances.
This will include, unlike say for a student accommodation building, the rooms for rent themselves and all the qualifying fixtures contained within.
It is worth highlighting also, that it does not matter whether the investor in such a property holds a freehold or leasehold interest, providing you own the relevant interest and secondly, the benefit of this tax relief is not just for UK investors but is also available to overseas owners. Offshore holding entities will benefit from reducing their withholding tax liability when they come to do their annual non-resident landlord tax return, which is subject to paying 20% income tax on all income remitted offshore.
If you would like to discuss the above article or have a scenario that you would like to explore further, then please contact one of our directors.