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Furnished Holiday Lets – HMRC Clarify Legislation

The window to claim Capital Allowances tax relief on furnished holiday lettings (FHLs) is fast decreasing before repeal of the legislation in April 2025 and HMRC have now clarified the transitional rules about who can or can't claim.

07 Nov 2024

Written by: David Gibson

New Case Law – Capital v Revenue

A recent important Supreme Court decision in Centrica Overseas Holdings Limited v HMRC addresses the deductibility of expenses incurred by a company. The bar to dedeuct costs has been raised considerably

04 Oct 2024

Written by: David Gibson

HMRC To Increase Scrutiny on Capital Allowances Claims

Not only are Allowances more advantageous than ever before, but HMRC are strategically targeting tax leakage – including through Capital Allowances. Getting the correct advice is essential

04 Oct 2024

Written by: Russell Bennett

Archive

 

Latest News

Furnished Holiday Lets – HMRC Clarify Legislation

07 Nov 2024

The window to claim Capital Allowances tax relief on furnished holiday lettings (FHLs) is fast decreasing before repeal of the legislation in April 2025 and HMRC have now clarified the transitional rules about who can or can't claim.

New Case Law – Capital v Revenue

04 Oct 2024

A recent important Supreme Court decision in Centrica Overseas Holdings Limited v HMRC addresses the deductibility of expenses incurred by a company. The bar to dedeuct costs has been raised considerably

HMRC To Increase Scrutiny on Capital Allowances Claims

04 Oct 2024

Not only are Allowances more advantageous than ever before, but HMRC are strategically targeting tax leakage – including through Capital Allowances. Getting the correct advice is essential

100% Full Expensing – What is it and why it’s important

09 Sep 2024

Hailed as the “Greatest Tax Break in History” when it was introduced in 2021, the 130% Super Deduction aimed to take some of the sting away from the hike in Corporation Tax rate that was announced in the same speech. Its replacement, Full Expensing (FE), took over in April 2023 as a slightly less headline-grabby 100% First Year Allowance. But what is it?

Some Good News for Furnished Holiday Let Owners

05 Aug 2024

Positive transitional rules have now been published allowing Furnished Holiday Let owners the ability to use Capital Allowances beyond April 2025

Case Ruling – HMRC v Altrad Services Limited

10 Jul 2024

The decision by the Court of Appeal will have far reaching implications in that it clearly resets the boundaries of what is a capital allowances avoidance scheme designed to increase the quantum of capital allowances claimed

Spring Budget Update

06 Mar 2024

Chancellor Jeremey Hunt announces changes to the capital allowances legislation affecting furnished holiday let owners

Capital v Revenue – Understand The Risks v Benefit

24 Jan 2024

As we are fast approaching the self assessment filing deadline for individuals and the amendment window for corporate entities with a year end of March, understanding the importance of what constitutes capital or revenue expenditure, and the risks and benefits associated with it, is extremely important.

First Year Allowances for Corporate Members of Partnerships

19 Jan 2024

In a positive move HMRC have updated their capital allowances guidance for partnerships stating that partnerships with underlying corporate partners can claim first year allowances

In the current market with lower loan to values, government policy tightening the ability to mitigate tax through carried forward losses and loan interest payment.  Capital Allowances remains one of the key ways to obtain a significant tax saving against property expenditure.  Here we set out what the benefit looks like for a business or an investor.

Not fully utilising the benefit of Capital Allowances on a development will ultimately reduce profits after tax for a business or lower the returns on an investment.

Often for a business or investor embarking on a development, its primary concern is the management of costs to deliver the project within budget.  Whilst the claiming of Capital Allowances does not reduce the outlay of expenditure to pay for such developments, they do reduce costs post completion.

The development of a standard Cat A office which costs say £10m to build, will typically attract Capital Allowances of up to £4.5m.  In benefit terms, if the property is to be held by an owner occupier or investor deriving an income, paying tax at say 20%, the total benefit to them would be a £900,000 cash saving, by reducing the amount of tax which would otherwise be paid.

From a feasibility point of view, it could therefore be argued that the net cost of the development is rather £9.1m, albeit the allowances are claimed over a number of years.

The benefit attained, is directly correlated to the given tax rate payable by the claimant.  Therefore, the benefit to a high net worth individual, who could be in a partnership, paying 45% tax rate is going to have a higher cash benefit than for a corporate tax payer of currently 19%.

Irrespective of the benefit attainable, research as shown that majority of claims are not processed, down to a variety of reasons, which means that in our example £900,000 of tax revenue is passed back to HMRC.

Now not all parties can claim Capital Allowances, with the most common reason being that the development is to be held as trading stock with the intention to sell on once completed.  In this scenario, the Capital Allowances should still be quantified so that they can be included within the heads of terms.  By highlighting to a potential buyer, the unclaimed value of Capital Allowances whilst may not always lead to a higher purchaser price, but a significant value can still be added to the deal as part of the overall negotiations.

Finally, for REITs (Real Estate Investment Trusts) and PAIFs (Property Authorised Investment Funds), who are legally required to claim Capital Allowances under a shadow tax regime.  Whilst there is no direct tax benefit, as tax is paid at an investor level, it does however provide a benefit by retaining cash in the business by reducing the amount that has to be distributed to the investors via a PID (property income dividend).

To discuss this article or if you have any general Capital Allowance queries, then please get in contact with one of our Directors.