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< Back to Latest News Studies Newsletter: Capital Allowances Update (Issue 19)

Talking Tax: July 2023

Author: Matt Jeffery, Managing Director

Last month our capital allowances team assisted 35 different clients to identify claims for capital allowances, unlocking over £2.9m in unclaimed tax relief.   This will result in cash tax savings for our clients of at least £680,000!

Below is a summary of some of the cases we worked on:

Purchase of a Care Facility

An accountant Zeal has previously worked with referred a client who had purchased a brand new apartment block in Bolton. Although the original intention was for the apartments to be for normal residential use, they were purchased by an assisted living care business. 

The property was purchased in 2021 for £2,695,000. As our client was the first owner of the building’s fixtures, they had full entitlement to make an unrestricted capital allowances claim on part of the purchase price.

Having undertaken a site survey of the property and prepared a detailed capital allowances valuation report, Zeal identified £352,434 of the £2,695,000 purchase price as qualifying for capital allowances. This will result in up to £88,000 of corporation tax savings. In addition, an immediate refund of corporation tax paid last year of £16,255 was also received.

Construction of a Medical Centre

Zeal achieved a great result last month for a Medical Centre in South Wales.

The GP practice constructed a purpose-built medical centre in 2008 at a cost of £875,000. Following discussions with the clients’ accountants and a review of the tax computations in the tax year the property was constructed, it was established that no tax relief had been claimed on the construction costs. As expected, capital allowances had only been claimed on the fit out costs, such as the furniture and medical equipment.

Due to the time that had elapsed since the building was constructed, it was not possible to obtain a detailed breakdown from the main contractor of the construction costs. Where detailed cost information is available, Zeal can prepare the capital allowances claim based on actual costs incurred. In the absence of the records required,  Zeal’s technical team were able to calculate a rebuild cost assessment based on a site survey and using a methodology that is acceptable by HMRC and the Valuations Office Agency (VOA).

In summary, Zeal identified £261,446 of expenditure qualifying for capital allowances. This will generate income tax savings for the GP’s of up to £117,659.  By making the claim in the earliest open partnership tax return (2021/22), a refund of over £25,000 of tax paid last year by the GP’s was received.

Purchase of a Guest House

Zeal have helped hundreds of B&B / Guest House owners unlock millions of pounds in tax savings on the purchase, construction or refurbishment of their properties. 

Last month we helped the owners of a Guest House in Okehampton to identify £78,754 of the £228,400 (including SDLT) purchase price as qualifying for capital allowances. This will result in total income tax and Class 4 NI tax savings of at least £22,839.

By making the claim in an amended 2021/22 partnership tax return, the partners received cash repayments totaling £5,638. Their payments on account due by 31 July 2023 of £1,338 each, were also eliminated. Our clients were thrilled with the result.

Refurbishment of a Holiday Let

Zeal’s partnership with Sykes Holiday Cottages and its sister brands means we regularly assist holiday let owners to maximise the tax relief on the capital investment in their holiday let properties. This includes claiming capital allowances on the property purchase price and/or refurbishment costs.

Last month we helped several holiday let owners generate valuable tax savings. One stand out case, however, was the costs a holiday let owner had incurred to convert a residential property for holiday letting.

In 2018, the client incurred £335,352 of expenditure to refurbish and extend the property. This included installing new heating and electrical systems, adding a new kitchen and en-suite bathrooms, plus a full redecoration of the property. Zeal identified £125,907 of the £335,352 costs as qualifying for capital allowances. This resulted in income tax savings of at least £25,180.

A brief summary of other clients we have helped this month….

Purchase of Children’s Nursery

Purchase date: 2007
Purchase price = £248,460
CA’s identified = £62,787
Tax saved = £18,208

Purchase of Industrial Unit

Date: 2012
Total cost = £219,995
CA’s identified = £42,730
Tax saved = £17,092

 Purchase of a Pub

Date: 2003
Purchase price = £252,000
CA’s identified = £70,886
Tax saved = £14,177

For help with Embedded Capital Allowances or Specialist Tax Advisory, please contact Zeal on hello@gozeal.co.uk or 01633 287898.