Talking Tax: November 2022
Author: Matt Jeffery, Managing Director
October was another busy month for the capital allowances team. We assisted 36 different clients to identify claims, unlocking over £4.9m in unclaimed tax relief. This will result in cash tax savings for our clients of at least £980,000!
Below is a summary of some of the cases we worked on:
Purchase of Hotel & Restaurant
Our client purchased a hotel and restaurant in 2000 and 2005 for a total sum of £1.1m. Although the owners run the businesses, the buildings were acquired in their property company.
Identified £277,967 as qualifying for capital allowances.
Total corporation tax savings of: £52,814
Cash repayment: £8,303
Refurbishment of a Holiday Let
in North Wales
Our client incurred £650,000 to convert a derelict building to a stunning holiday let on the North Wales coast. Zeal carried out a detailed capital allowances review of the refurbishment costs.
Identified £259,514 as qualifying for capital allowances.
Total corporation tax savings of: £49,307
Cash repayment: £14,210
Purchase of Children’s Nursery in Exeter
Our client incurred £155,000 to purchase a Nursery building in 2012.
Identified £36,634 as qualifying for capital allowances.
Total income tax & NI savings: £10,623
Purchase of a Dog Boarding Kennel
Our client purchased a Dog Boarding Kennel in June 2020 for £725,000. A full claim was not possible as the building was bought as an existing business property. This was because the sale had completed and 2 years had now passed, meaning it was to late to make a full claim. However, a restricted claim was possible, resulting in £57,591 of expenditure qualifying for capital allowances.
By making the claim in an amended 2020/21 partnership tax return, Zeal was able to increase the small loss by the value of the qualifying capital allowances. As one of the owners had paid tax at the higher rate in a PAYE job in the 3 years before purchase, Zeal was also able to obtain a tax repayment of £22,044.
Refurbishment of a Hotel
Zeal carried out a capital allowances review of c.£1m of expenditure incurred over a 5 year period to renovate and extend a hotel in Weston-super-Mare. The client’s accountant had claimed all the basic capital allowances but suggested we carried out a review as well. Our specialist knowledge and experience enabled us to identify an additional £131,277 of expenditure qualifying for capital allowances. This equated to corporation tax savings of £24,942.
Unlocking Tax Savings for Caravan Parks
Zeal’s capital allowances team attended the Holiday Park & Innovation Show in the NEC, Birmingham at the start of November presenting and exhibiting to park owners.
The benefit of capital allowances for Caravan Parks (including residential home parks) is often overlooked or underclaimed. Working with industry organisations including the British Holiday & Home Park Association (BH&HPA), Zeal have helped Park owners all over the UK unlock significant capital allowances tax savings on the purchase, construction, extension or refurbishment of their sites. This includes services under the ground, fixtures like kitchens, bathrooms, alarms, electrical & heating systems etc within onsite buildings and certain infrastructure around the park. This month we helped 3 parks to unlock just over £145,000 in tax savings!
Zeal’s tax advisory team also work closely with clients like caravan park owners to ensure they have the most tax efficient structure for their business. Many parks are operated as un-incorporated businesses, which usually means they are paying too much tax! Zeal often help businesses restructure into a corporate entity as it results in lower annual tax charges and also provides the flexibility to plan for the future. A popular option for park owners is to structure the new company with different classes of shares, enabling them to pass on ownership to their family over time, whilst remaining in full control of the company in the short-term.
One of the park owners we helped last month to claim capital allowances on the purchase of their park in 2007, are now going through the process of incorporating their business. Not only will this mean that they will pay less tax each year and potentially eliminate the gain on the property to date, they will also be able to claim the balance of the capital allowances tax savings when the incorporation is completed. This will generate a cash windfall of around £32,000. They are also exploring the option of acquiring some or all the park through their pension fund. This will not only release cash from their pension now, but also enable the growth in value of the business to be tax free!
For help with Embedded Capital Allowances or Specialist Tax Advisory, please contact Zeal on email@example.com