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< Back to Latest News Studies Newsletter: Talking Tax Issue 25 (January 2024)

January 2025

Capital Allowances Update

Author: Matt Jeffery, Managing Director

With December being a short working month, the capital allowances team did an amazing job in assisting 36 different clients to identify claims for capital allowances, unlocking over £7.2m in unclaimed tax relief.  This will result in cash tax savings for our clients of over £1.5m!

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

Capital Allowances Review – National Care Provider

Zeal have been working with a national provider of care for children and adults with learning difficulties, to identify a missed claim for capital allowances on their investment in their care facilities. Due to the scale of the business, this is a project Zeal have been working on throughout 2023. This included over 25 site visits by our survey and technical team, analysing thousands of lines of expenditure and the preparation of over 50 capital allowances reports! Our team had a deadline of Friday 15th December to deliver the claims to the client. As usual, Zeal exceeded expectations and delivered everything to our client on Monday 11th! 

Our review covered expenditure on Land & buildings Additions between 2019 to 2022. Zeal identified that capital allowances had not been claimed on part of the purchase price of qualifying properties, extending the buildings or on improvement works.  

In summary, we identified over £4m of unclaimed capital allowances. Due to the availability of Annual Investment Allowances and in some cases, the super deduction, an immediate cash benefit in excess of £400,000 was received by our client! It was a fantastic result for our client. The accountancy practice that referred the client to Zeal were also delighted with the result and the way Zeal managed the relationship with their client. 

We are now working with the client to put procedures in place so that capital allowances are dealt with at the point of acquisition and all cost information is captured going forward. This will reduce costs for the client and ensure they don’t miss any tax relief in the future.

Capital Allowances on a Residential Development

Yes, that’s right, we claimed capital allowances on a residential development! How is that even possible?

It is widely understood that capital allowances can’t be claimed on dwellings (residential property / somebody’s home). A self-contained flat is a dwelling. No fixtures within a dwelling qualify for capital allowances. However, where you have multiple flats in one unit, the corridors, stairwells, entrance hallways, plant rooms, garages, bike stores etc are not dwellings! Capital allowances can be claimed on fixtures within these areas. For example, electrical and heating installations, carpets, lift, alarm systems etc.

In this particular case, our client had spent approximately £1.8m to convert the empty space above commercial units in Swansea City Centre, to create 28 flats. The ground floor commercial units were also subject to some improvements. In total, Zeal identified £154,889 of expenditure qualifying for capital allowances. This equated to a reduction in corporation tax payable of £29,429. 

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

Purchase of a Guest House in North Wales

Purchase date: 2007
Purchase price = £309,000
CA’s identified = £99,493
Tax saved = £28,852

Purchase of a Funeral Homes in Lincoln

Purchase date: 2020
Purchase price = £462,000
CA’s identified = £124,782
Tax saved = £31,195

Purchase of a Dog Boarding Kennels in Somerset

Date: 2013
Cost = £181,800
CA’s identified = £40,718
Tax saved = £16,287

(higher rate taxpayer)

Specialist Tax Advice Update

Inheritance Tax and Holiday Lets

Our tax advisors have written an article on Inheritance tax for Holiday Let owners. This is an area of tax that we get asked a lot about, particularly by holiday let owners. 

Holiday let owners often get mixed advice as to whether their business would be exempt from IHT on death. In most cases, holiday lets won’t pass the trading versus investment test that the courts will apply. However, there are examples where holiday let businesses can be exempt from IHT. 

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

R&D Tax Credits Update

Author: Adam Spriggs, R&D Tax Director

Subcontracted and Subsidised Tribunal Hearings

Following the Hadee (accepted HMRC’s subcontracted and subsided view) and Quinn (rejected HMRCs subsidised view, however HMRC did not appeal) cases over the past few years, two lead cases on both subcontracted and subsidised R&D were recently heard in November and December 2023.

Zeal’s R&D Tax Director, Adam Spriggs, was involved in the latter hearing providing assistance and guidance to the appellant. Whilst both cases already had all R&D activity approved there were differences and had prior enquiries settled under the SME scheme; the former involved a discovery assessment and so included a debate around HMRC’s generally prevailing practice ie had HMRC changed their interpretation, whereas the latter looked at HMRC statements that their interpretation was unchanged, therefore the criteria around economic risk, autonomy and IP ownership was still relevant in establishing subcontracted R&D.

Judgements are expected within the next two months.

If you would like to discuss this form or how Zeal can assist any clients you are working with, please contact Adam on adam@gozeal.co.uk.