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< Back to Latest News Studies Newsletter: Talking Tax Issue 28 (April 2024)

April 2024

Capital Allowances Update

Author: Matt Jeffery, Managing Director

During March, Zeal assist 33 different clients to unlock over £3.8 million pounds in unclaimed capital allowances. This will result in cash tax savings for our clients of over £760,000.

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

Capital Allowances Review – Children’s Care Homes

Over the past 12 months, Zeal have worked with a number of providers of care facilities for children, helping them take advantage of unclaimed capital allowances. Zeal reviews their capital investment in their business properties and investigates whether they have missed tax relief claims on the original purchase price of the building and any improvement works carried out since purchase. 

Our reviews generally cover a period of 5 years to 20 years+, with any unclaimed expenditure being capitalised in last years tax return. This results in a cash tax repayments of overpaid tax and reductions in tax bills for several years after!

Last month we completed a review for a provider based in West Wales. Over the past few years, they have acquired several properties that are used as Children’s Homes. Zeal identified that 4 of their properties qualified for a capital allowances claim on part of the purchase price.

Following site surveys of the properties, our team were able to identify £266,455 of expenditure qualifying for plant and machinery capital allowances. This resulted in total corporation tax savings of £66,613 and a reduction in the client’s latest corporation tax bill of £36,194. A great result!

Purchase of an Office from a Pension Fund

Following the 2014 rule changes for claiming capital allowances on building fixtures, the ability to claim capital allowances on the purchase of second-hand commercial property has been significantly diminished. In most cases, the claim rests with the Vendor or there is no claim at all. However, there are still opportunities for purchasers of commercial property to benefit from valuable capital allowances. 

Last month, we had a great example of how important it is to check the detail. We were referred a client that had purchased their office building 2 years ago and was told by their accountant that they were not eligible to claim any tax relief. Following a review of the purchase contract and HM Land Registry records, Zeal established that the property was acquired from a pension fund and the pension fund owned the property from new. This meant there was in fact entitlement to make a claim!

Zeal’s specialists prepared a capital allowances valuation report, which identified £129,931 of the £425,250 purchase price as qualifying for capital allowances. This resulted in a £24,686 corporation tax refund and a very happy business owner!

If you have a client that is acquiring commercial property or has acquired commercial property in the last few years, we would recommend a free review of their capital allowances entitlement by one of the team at Zeal.

Commercial Property Investor

We carried out a capital allowances review for a commercial property investor based in the Southeast.  They had a portfolio of commercial property lets that had been accumulated over the last 10 years.  Although a large proportion of the properties didn’t qualify for a claim, the 4 properties that did qualify were sitting on £724,449 of unclaimed capital allowances. This will generate £181,000 of corporation tax savings and a cash repayment in excess of £25,000!

Specialist Tax Advice Update

Stamp Duty Land Tax (or equivalent)

One of the surprise announcements from the Spring Budget was the abolition of SDLT Multiple Dwellings Relief (MDR) from 1 June 2024. 

MDR is a valuable tax relief for buyers of residential property that applies when two or more dwellings (houses, flats, annexes etc . . .) are acquired in a single transaction or in several linked transactions. Where MDR applies, SDLT payable can be significantly reduced.

This removal of the relief from 1 June 2024 is a blow to property investors, businesses and even the general public. MDR was an SDLT relief that was applicable for purchasers of their main residence which included a grannie annexe or converted outbuildings (often used for holiday letting). For example, the purchaser of a block of 5 residential flats for £1m will pay an extra £41,250 in SDLT from 1 June 2025!

Whilst the relief will be removed from 1 June 2025, there is a 4 year window after purchase to reclaim overpaid SDLT.  If you or a client has purchased a site with more than 1 dwelling in the past 4 years, get in touch with the team at Zeal for a free review.

Notwithstanding the above, purchases of 6 or more dwellings and the purchase of mixed use properties (commercial and residential) will still qualify to use the non-residential rates of SDLT.

Please note – the rules do not currently apply to properties situated in Wales or Scotland.  Zeal have had discussions with the Welsh Revenue Authority (WRA) with regards to similar changes to the Land Transaction Tax (LTT) rules in Wales. It is expected that Wales will follow suit and also make changes to the rules for MDR. However, the WRA have confirmed that there will be sufficient notice given and transitional rules will apply.  

Furnished Holiday Let (FHL) Tax Regime Abolished – Latest Update

Following the announcement in the Spring Budget that the FHL regime will be abolished from April 2025, we are still waiting on the publication of the draft legislation. We are asked on a daily basis when this is likely to be released, but unfortunately, it is anyone’s guess!

We are aware that Parliament was on Easter recess until Monday 15 April, so nothing is expected imminently. However, we all hope it is sooner than later so that business owners and their advisors can have clarity and plan for the future.

On a positive note, we have seen and heard suggestions that pools of capital allowances and losses remaining at April 2025 will still be claimable after the FHL regime is exhausted.

Should this be the case, existing owners and those starting their business before 2025 can benefit from capital allowances after the FHL regime ends.You can read our summary of the FHL Budget announcement here.

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