Talking Tax: August 2022
Author: Matt Jeffery, Managing Director
July was another busy month for the capital allowances team. We completed claims for 26 different clients, unlocking over £3.6m in unclaimed tax relief. Below is a summary of three interesting cases we worked on:
Capital Allowances Review – Care & Education Business
Zeal carried out the annual capital allowances review for a company that provides care and education for children and young adults with specialist needs associated with autism. As the business incurs significant expenditure every year to purchase, build and refurbish their buildings, Zeal carries out a capital allowances review of land & building additions.
During the year ended 31 August 2021, capital expenditure was incurred to purchase four new sites and to refurbish a further five sites. In summary, of the c.£3.2m expenditure incurred, Zeal identified £2.3m qualifying for capital allowances or a revenue tax deduction. This generated total corporation tax savings of at least £437,000. The corporation tax due for year ended 31 July 2021 was reduced by £163k. Zeal worked alongside the clients’ accountants to submit the claim reports and corporation tax return to HMRC.
Capital Allowances Claim – New Building Purchase
Zeal was contacted by one of our accountant partners about a client in the process of purchasing a commercial property. Due to the changes in legislation introduced from 1 April 2014, capital allowances claims generally rest with the owner of the property, prior to 1 April 2014. For the Purchaser to be able to claim capital allowances, the property would need to be purchased from a non-taxpaying entity (e.g. Charity, Pension Fund, Council etc), purchase it brand new or purchase it from a developer who has refurbished the property. If the Vendor does not meet this criteria, they need to agree the capital allowances value with the Vendor. This can be done up to 2 years after sale, but in our experience, if it is not agreed at the point of sale, it is very difficult to secure any capital allowances.
In this case, the Purchaser instructed Zeal to review the capital allowances position early in the sale process. This gave Zeal and the Purchaser the best chance of securing tax relief on the building purchase. Zeal quickly established that the Vendor had never claimed any capital allowances on the original purchase, but were entitled to do so. Zeal negotiated the transfer of these unclaimed capital allowances in full for our client and provided their solicitor with a contract clause that binded the Vendor to what was agreed, post sale. This avoided holding up the sale transaction but ensured our client would receive the tax savings available. The capital allowances identified totalled £63,472, which will save our client corporation tax of over £12,000.
It is worth noting that Zeal do not charge to review and negotiate the capital allowances on a commercial property transaction. We only charge if we can save tax!
Following our new partnership with Sykes Holiday Cottages, Zeal is fast becoming the experts in Furnished Holiday Letting (includes Serviced Accommodation). Last month we completed 14 claims for holiday let clients. The majority related to the purchase of the buildings, but we also completed a claim on the construction of a holiday let and the conversion of outbuildings to letting units.
Unlike traditional buy-to-let properties, holiday lets qualify for capital allowances if they meet the letting criteria. In short, a property must be let furnished, be available for let 210 days of the year and actually let for 105. The property must also not be let consecutively to the same person for more than 30 days. If a property meets these conditions they can benefit from the enhanced tax reliefs (it’s not a requirement that the tenant is on their holiday to qualify!). With the rise in landlords diversifying their portfolio to include serviced accommodation, they and their advisors should be reviewing their entitlement to claim capital allowances now.
Zeal are not just capital allowances experts. We have a team of qualified tax professionals that provide advice to holiday let owners to ensure they understand the tax rules, reporting requirements and most importantly, don’t overpay tax. Each month we issue a blog for holiday let owners. This month we looked at the expenses that can be claimed by holiday let owners. We have had great feedback from our clients and contacts.
Download your copy HERE.
Our team have been preparing for two prestigious events which we will be attending in September – The FinTech Awards Wales and The Cardiff & District Law Society (CDLS) Annual Dinner.
The FinTech Awards Wales recognises the achievements of the thriving FinTech sector across the country, bringing Wales’ leading innovators and digital experts together in an evening of celebration. In addition to attending, Zeal are also proud to be sponsoring the ‘Team of the Year’ category. Shortlisted for the award are Admiral, Wagonex and Comparison Creator. We’d like to wish all finalists congratulations and good luck prior to the event!
Returning after three years, The CDLS Annual Dinner will be an exciting opportunity to network with other members and legal professionals, as well as hear from Olympian, Eddie ‘The Eagle’ Edwards.