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< Back to Latest News Studies Newsletter: Talking Tax Issue 29 (May 2024)

May 2024

Reflection of April 2024

Capital Allowances Update

Author: Matt Jeffery, Managing Director

In the first month of the 2024/25 financial year, Zeal’s capital allowances team assisted 32 different clients to unlock over £2.6 million pounds in unclaimed capital allowances. This will result in cash tax savings of over £520,000!

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

Capital Allowances Review – Coffee Shop Fit-Out Costs

Last month we helped a National chain of coffee shops review current and historical capital expenditure incurred on the refurbishment and fit-out of new retail units. 

The company spend, on average, around £150,000 on improvement works per property to fit them out to their specification and brand.  Zeal’s team of capital allowances specialists reviewed the expenditure incurred over the past 4 years to identify any missed claims for capital allowances.

Whilst their accountants had claimed all the obvious costs, such as electrical & heating systems, Zeal were still able to uplift claims by 13.7%. The client’s accountant had also overlooked the fact Structures & Buildings Allowances (“SBAs”) could be claimed for the expenditure that didn’t qualify for a plant & machinery capital allowances.

The additional capital allowances identified will save the client over £61,000 in corporation tax (excluding the additional annual tax savings from SBA’s). They also have peace of mind that their claims are accurate!

Capital Allowances Review – Property Investor Portfolio

Zeal achieved an excellent result last month for a client that invests in commercial property.

The client had a portfolio of commercial and residential properties acquired over the past 15 years. Zeal carried out an entitlement review of the property portfolio to identify commercial properties that would qualify for a capital allowances claim on part of the original purchase price or development work, post acquisition. This included reviewing the legal documents (contracts & CPSE’s), Land Registry records and accounting information.

In total, we identified that 3 property purchases qualified for a full or restricted capital allowances claim. In addition, our team uncovered a previously missed opportunity for our client to claim tax relief on the costs incurred during a development project in 2018, in which the upper floors of a high street property were converted to 4 self-contained flats (used as serviced accommodation).

Unfortunately, due to the time that had lapsed, the client did not have any detailed breakdowns of the conversion costs and the contractor was also not able to help. Fortunately, Zeal’s in-house Quantity Surveyor was able to assess the value of the works completed and present it in a format that is acceptable to HMRC and the VOA.    

Our review resulted in £324,425 of the historical capital expenditure qualifying for capital allowances. This will result in total corporation tax savings of up to £81,106. A cash refund of £13,658 was also received within 2 weeks of submission to HMRC!

Purchases of Bed & Breakfasts / Guest Houses

When Zeal first started trading in January 2017, B&B’s and Guest Houses were our key target market. They represented an industry that would be sitting on thousands of pounds of unclaimed tax relief in their trading properties, but would be totally unaware. 

This was mainly because, at the time, capital allowances claims on commercial property purchases was a service that was only available to large businesses with significant capital investment. There were very few capital allowances firms in the market and most accountants were unaware of the ability for their clients to make such a capital allowances claim.

Fast forward 7 years, and Zeal are still helping owners of B&B’s to unlock significant tax savings, that they were unaware of! Last month Zeal helped 3 different B&B’s to identify and claim capital allowances on the purchase of their properties. A summary of the results are below:

Purchase date: 2009
Purchase price = £624,000
CA’s identified = £134,980
Tax saved = £39,144

Purchase date: 2021
Purchase price = £535,000
CA’s identified = £44,591
Tax saved = £7,247*

Date: 2016
Purchase price = £655,949
CA’s identified = £70,371
Tax saved = £20,407

Over the years, Zeal have witnessed several, so called ‘capital allowances specialists’, enter the industry. These firms are often heavily sales led and have no evident qualified member of their team. 

Last month we came across a company that had engaged a capital allowances specialist to make claims on their commercial property portfolio. Within a week, the firm came back to them with the figures they could claim and details of the huge tax savings they were going to receive. Unfortunately, the client was a little naïve and did not check or challenge any of the limited information they were provided by the firm.

Fast forward several weeks and a HMRC enquiry letter was received by the company. The enquiry was into the capital allowances claims submitted (or lack of them!).  No capital allowances reports were submitted to HMRC to provide support for the figures claimed and there was no explanations as to why the properties qualified for a claim.  It transpired that the qualifying amounts had been ESTIMATED!

Zeal was engaged by the company and is now working with the Directors and HMRC to resolve the enquiry. We have made a full disclosure to HMRC that the claims had been estimated and that Zeal will commence the review from scratch. First step is the entitlement review (work out what actually qualifies) and then set our surveyors to work to determine the actual qualifying expenditure. Our result is looking like it will be less than the over inflated estimates, but at least it will all be legitimate and correct!

Zeal see evidence on a weekly basis of poor quality capital allowances claims, incorrect advice and incredibly pushy sales tactics. Zeal welcomes the consultation announced in the Spring Budget to raise the standards in the tax advice market. It is our view that this review is long overdue and that firms should not be allowed to practice without being members of regulatory bodies.

Specialist Tax Advice Update

Article: UK Agency Owner VAT Guide – Furnished Holiday Lets

In this article, Zeal explains about VAT implications for Furnished Holiday Let owners. The guide covers the following topics:

What is Value Added Tax (VAT)?

Income from Holiday Lets – Is this Subject to VAT?

When do I need to register for VAT?

Can I Voluntary Register for VAT?

How do I register for VAT?

What is the Flat Rate Scheme for VAT?

Additional Income Required to Compensate for VAT.

Reclaim of Expenses Under Standard VAT Registration.

Can I reclaim VAT on Refurbishment or Building Costs?

Submitting Your Vat Return and Record Keeping

De-Registering for VAT

Managing Availability for VAT Purposes

What if I let it Long-Term in the Off Season?

What if I exceed the VAT threshold but not registered?

What if I only exceed the threshold temporarily?

What if I am a Non-Resident Landlord?

What Happens When I Sell?

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