Talking Tax: February 2023
Author: Matt Jeffery, Managing Director
January is notoriously the busiest month of the year for tax teams as the 31st is the deadline to submit personal and partnership tax returns.
This was no different for 2023, with it being extremely busy for Zeal’s capital allowances team. By submitting claims for capital allowances before the 31st deadline, our clients could benefit from refunds of tax paid last year and reduce or eliminate their tax due in January.
In summary, last month our team assisted 58 different clients to identify claims for capital allowances, unlocking over £4.8m in unclaimed tax relief. This will result in cash tax savings for our clients of at least 1 million pounds!
Below is a summary of some of the cases we worked on:
Holiday Lets / Serviced Accommodation
Zeal specialises in helping owners of holiday let properties (often referred to as serviced accommodation) to claim the tax savings on the purchase price, refurbishment or build costs. To qualify for this valuable tax relief, the property needs to be let furnished, be available for let 210 days of the year and actually let for 105 days. In addition, during the 105 day period, the property can’t be occupied by the same person consecutively for 30 days or more. If a property meets this criteria, significant tax savings can be realised.
Last month we assisted 31 serviced accommodation owners, unlocking almost £500,000 in unclaimed tax relief. Examples include:
Purchase of a residential property in Stourbridge for holiday letting.
Purchase price = £193,800.
CA’s identified = £51,090.
Refund of £11,433.
Purchase & extension of residential property in Bath for holiday letting.
Purchase price and extension cost = £460,530.
CA’s identified = £99,923.
Refund of £4,706.
Future savings of £15,279.
Conversion of an outbuilding to a holiday let in Dorset.
Refurbishment cost = £28,260.
CA’s identified = £21,315.
Refund of £1,973.
Future savings of £6,553.
Holiday Lets are becoming extremely popular with property investors. Many are switching from traditional buy to lets to serviced accommodation. If you own a qualifying property or have clients that do, get in touch with Zeal.
Purchase of Children’s Nursery in Witney
A company purchased the property in 2001 for £315,000 (excluding SDLT & Legal fees).
Total capital allowances identified of £67,052.
Total corporation tax savings of £12,740.
By making the claim in the company’s earliest open corporation tax return, being 31 January 2021, a refund of corporation tax paid of £1,495 was reclaimed. A further repayment of £2,678 was received for year end 31 January 2022. The balance of the tax savings will be received each year going forward.
Purchase of a Caravan Park in Powys
Our client purchased a caravan and touring park in 2021 for £654,500. Due to the date of purchase the claim was restricted, however, Zeal were still able to identify £144,103 of expenditure qualifying for capital allowances.
As the claim was made in the first year of trading, our claim created tax losses. The losses were then set off against tax paid on the owner’s salary from their employment in the 3 years before they bought the site. The result achieved was:
Cash refund generated of £9,986.
Future tax savings of £11,465.
Tax Advisory – Stamp Duty Land Tax
Zeal has a team that provide advice on Stamp Duty Land Tax (Land Transaction Tax ‘LTT’ in Wales or Land & Buildings Transaction Tax ‘LBTT’ in Scotland). Our knowledge and experience of the relevant legislation enables us to identify opportunities to reduce Stamp taxes or reclaim overpaid amounts.
The most common area we see SDLT over paid is on the purchase of sites with multiple buildings, certain purchases by developers and uninhabitable second properties. The latter is perhaps the most common SDLT reclaim. Where second residential properties were purchased in a run-down state, the additional 3%/4% SDLT surcharge paid can be reclaimed.
As an example, last month we had a client that had bought a second property for holiday letting and paid an extra £6,210 in SDLT. The property needed to be rewired as the system was so old it was deemed unsafe. There were also damp issues with the property. After presenting the case to HMRC’s Stamp Taxes Team, our client received a refund of the £6,210 paid.
If you have any questions on SDLT/LTT/LBTT, please contact a member of the team.
For help with Embedded Capital Allowances or Specialist Tax Advisory, please contact Zeal on email@example.com or 01633 287898.