Talking Tax: February 2022
Author: Matt Jeffery, Managing Director
January proved to be the busiest month of the year again for our capital allowances team. For individuals, 31 January is the deadline to submit an amended self-assessment tax return for the previous tax year. This January, the team were amending 2019/20 tax returns before the deadline to reclaim
tax overpaid last year, as well as reducing or eliminating tax payable for 2020/21. In total, we assisted 44 different clients identify claims for capital allowances, unlocking over £5.9m in unclaimed capital allowances. Below is a summary of three interesting cases we worked on:
Assisted Living Care Facilities
Zeal Zeal were referred a client from an accountancy firm we work with in the North West. The client owned a care business, with over 100 sites around the UK. The company had been subject to a capital allowances review in 2015 by one of the Big 4 Tax Depreciation Teams. Initially, there appeared to be limited scope for a CA review. However, following a meeting with the client and the FD of the company, it was established that no CA’s had ever been claimed on the properties held personally by the business owner.
Of the 34 care facilities owned personally, entitlement to claim capital allowances was established on 27 properties. Almost all had previously been residential dwellings, before they were converted to licensed care facilities. Although the purchase prices were relatively low and acquired up to 20 years ago, total tax savings in excess of £600k were identified! By making the claim in an amended 2019/20 tax return, the repayment due for 2020 and reduction in taxable profits for 2021, saved the client over £100k in January 2022. Our client was over the moon!
Hotel / B&B
We had a great result last month for a client that had closed their hotel business in 2020/21. By making the claim in the final year of trading, we were able to obtain the full benefit of the capital allowances in the 2021 tax return. Trade losses were created that were then used against the partners other taxable income in 2021 and 2020 to obtain a cash repayment of £23k. Again, another very happy Zeal client.
Zeal were approached by a client that owned holiday lets, which they had acquired over the past 7 years. As the properties were all ex-residential before been used as holiday lets, they qualified for a capital allowances claim on the buildings fixtures. The client had been speaking with another CA firm, but their accountants didn’t feel comfortable with the advice being given and recommend they speak with Zeal. In fact, they had been given incorrect advice about 2 of the properties that they were in the process of selling. Luckily, Zeal were able to secure the capital allowances on the properties being sold, enabling the client to receive the benefit against the profits of the remaining holiday lets (over £15k in tax savings).
The clients were higher rate taxpayers and were paying significant annual tax liabilities on the profits of the holiday lets. Zeal introduced one of our tax specialists to the client and are now working with them and their accountant to incorporate the holiday let business, which will save them around £10k a year in tax.
February is usually a month for Zeal to draw breath and set our targets for 2022. However, with the extension of the filing deadline for 2020/21 tax returns extended until the end of the month, February is likely to be busier than usual.
If you have a client or contact that owns a commercial property or holiday let, get in touch with the team at Zeal to see if we can unlock valuable tax savings.