Talking Tax: January 2023
Author: Matt Jeffery, Managing Director
After a busy 2022, our capital allowances team were expecting to wind down in December, before the Christmas period. However, this was not the case!
On 5 December we were instructed to carry out a capital allowances review for the largest independent residential park owners in the UK. The only catch was that we needed to complete the review and submit the claims to HMRC before 31 December 2022. Fortunately, Zeal love a challenge!
Our team successfully completed the review and submitted everything to HMRC before we broke for the Christmas period. The claim wielded amazing results! In total, last month our capital allowances team assisted 21 different clients to identify claims for capital allowances, unlocking over £9.5m in unclaimed tax relief. This will result in cash tax savings for our clients of at least £1.9m!
Below is a summary of some of the cases we worked on:
Capital Allowances Review – Residential Home Parks
Having previously worked with this client in 2019 and with our wealth of experience in this sector, Zeal were ideally placed to review the park acquisitions and identify missed claims for capital allowances. The claims relate to electrical, water and gas services within the park that serve the mobile homes. The value of these fixtures are typically overlooked by park owners and their advisors.
Zeal carried out a review on a total of 98 park acquisitions to identify those that would qualify for a capital allowances claim. In summary, we identified entitlement to claim on 27 parks. We then put our survey team into action! Within a week all the parks had been surveyed and our technical team worked tirelessly to collate all the data and prepare the claim reports in time for the submission deadline.
Our team identified a total of £7.4m in unclaimed capital allowances. This will generate total corporation tax savings of £1.7m and an immediate cash refund of just under £500k.
Purchase of a Assisted Living Care Facilities
Our client, based in South Wales, provides assisted living care and recently purchased two adjacent properties to be used as care facilities. Although the properties were in residential use when purchased, they qualify for a capital allowances claim as they will be used for the purpose of a trading activity. The fact the properties were previously in residential use was actually a big tax benefit for our client as they are the first relevant owner of the fixtures for capital allowances purposes and so no clause/agreement was required with the Vendor in the sale contract.
The properties were acquired in 2021 by a limited company for a total of £750,000 (excluding LTT and fees). Zeal identified £180,187 of the purchase cost as qualifying for capital allowances. By making the claim in an amended 30 September 2021 corporation tax return, a refund of overpaid corporation tax totaling £34,000 was obtained.
Extension & Refurbishment of a Children’s Nursery
An accountancy firm referred a client that owned a children’s day care nursery. Having carried out an entitlement review, our team established that no claim could be made on the purchase of the property which was acquired in 2015. However, following purchase, the owners had spent around £300k to extend and refurbish the property.
The expenditure was capitalised as property improvements in the company accounts, but no tax relief claimed. We understand this was because the profits were low at the time the expenditure was incurred and there was also a misconception that the capital expenditure was for improvements and so would be deducted against any future sale proceeds to reduce Capital Gains Tax. On the contrary, capital allowances can in fact be claimed now without any impact on future CGT relief.
In summary, £117,214 of the extension and refurbishment costs qualified for capital allowances. This generated total corporation tax savings of at least £22,300 and a cash repayment of £5,300.
Purchase of a Kennel & Cattery
Our client incurred £700,000 to purchase the site in 2021.
Identified £61,668 as qualifying for capital allowances (restricted claim).
Created income tax losses that were set against PAYE tax in the 3 years before the business started.
Generated a cash repayment of £13,505.
For help with Embedded Capital Allowances, please contact Zeal on firstname.lastname@example.org