July 2024
– Reflection of June 2024 –
Capital Allowances Update
Author: Matt Jeffery, Managing Director & Tax Partner
Last month, Zeal’s capital allowances team assisted 21 different clients unlock over £2.1 million pounds in unclaimed capital allowances. This will result in cash tax savings for our clients of over £420,000!
Below is a summary of some of the cases we worked on:
Purchases of Children’s Day Care Nurseries
As partners for business with The National Day Nursery Association (NDNA) for over 5 years, Zeal have helped a wealth of nursery owners to unlock tax savings on the purchase, construction and refurbishment of their nursery buildings.
The ability to claim tax relief on part of the purchase price of a property, for qualifying embedded fixtures acquired with the building (e.g. kitchens, bathrooms, electrical & heating systems etc), is often available to nursery owners. This is particularly the case when the property was converted from residential use to a nursery, or the nursery was bought before April 2014.
Last month, we helped 3 different nursey owners unlock a total of £306,914 of expenditure qualifying or capital allowances. This will result in £60,00 to £120,000 in tax savings that our clients were completely unaware of they were entitled to. One client had a cash rebate of over £10,000 (after Zeal’s fee).
Holiday Let Owner – What a result!
Last month we had a fantastic result for an owner of a holiday let in Fort William, Scotland.
Our client had been operating a holiday let business for several years from what was originally their home. The property was purchased in 2007 for £386,250 (including SDLT & legal fees). Zeal identified that £93,848 of the original purchase price qualified for capital allowances. As the owners are higher rate taxpayers, this will save them over £37,500 in income tax savings.
During 2023, they had also carried out a refurbishment project on the building, spending £162,251. Zeal’s team of capital allowances specialists identified that £74,069 of the £162,251 qualified for capital allowances. This generated further tax savings of over £29,500!
By making the claims in amended 2022/23 tax returns, our client received a total cash refund of £21,810 and a reduction in tax payments due in July of over £7,000! They won’t pay any tax on their holiday let profits for the next few years at least. An amazing result and another very happy client!
A Restricted Claim on a Small Car Garage – Was it Worth It?
Our client purchased a car repair garage in 2010 for £180,000, however they had been advised by their accountant that it would not be worth claiming as our costs would outweigh the benefit. On further investigation (and a call with the accountant), we discovered that the concern was that the client would not be able to use the capital allowances as the business and property had been transferred to a limited company in 2024. It was expected that any capital allowances claimed would be clawed back on transfer. However, this is not the case!
On sale/transfer of the property, it is possible to apply a disposal value of a nominal amount. In this case it was £2. This means that if there was a pool of capital allowances remaining of say £25,000, after applying the disposal proceeds of £2, the client can claim a deduction of £24,998 (called a balancing allowance) in the tax return the property was transferred. Armed with this information, the accountant quickly saw the benefit for their client.
Following a site survey of the property, Zeal identified that £37,834 qualified for capital allowances. Zeal amended the 2022/23 partnership and personal tax returns to include the capital allowances claim and submitted it to HMRC. This resulted in cash refund of just over £2,500.
The 2023/24 partnership and personal tax returns were then drafted by the accountant. Zeal liaised directly with the accountant to apply the disposal value in the partnership tax return, and provided them with the relevant capital allowances election (including instructions on how to process in the returns). The balancing allowance received in 2023/24, will save the clients over £13,000 in income and Class 4 NI payments.
A great result and definitely worth it!
NEW PARTNER – Holiday Cottage Handbook
Zeal is excited to announce that a new relationship with Holiday Cottage Handbook!
Our teams are working together closely to help holiday let owners unlock tax relief hidden in their properties and pay only the right amount of tax.
With the publication of the draft legislation to abolish the FHL tax regime earlier this week, this is a very timely partnership as it is vital holiday let owners identify and claim all capital allowances before the scheme ends in April 2025.
Do you or any of your clients own a furnished holiday let? Get in touch!
Specialist Tax Advice Update
Article: FHL Tax Regime Abolition Confirmed – HMRC Publish Draft Legislation
HMRC have now published the proposed amendments to the Furnished Holiday Let (FHL) tax legislation, as announced in the Spring Budget 2024. The new legislation will remove the specific tax treatment and separate reporting requirements for FHLs.
The new rules will have the following key implications for FHL owners:
Relief for finance costs on FHLs (interest on loans & mortgages) restricted to basic rate (20%) tax deduction only.
Capital allowances will no longer be available.
Capital Gains Tax reliefs will be removed.
FHL income no longer classed as relevant earnings when calculating pension tax relief.
Capital Allowances Claims Aftercare
Zeal pride ourselves on the aftercare we provide our clients. We don’t just prepare a report and leave it with our client’s accountant to deal with. This is common for capital allowances practices that are surveyor based advisors, rather than tax specialists.
As Zeal have a mix of tax and surveying professionals, we can provide the complete service for our clients. This not only avoids extra accountancy costs for clients, but also ensures that the full capital allowances available can actually be claimed – and claimed in the most tax efficient manner. Furthermore, Accountants hate having a report dumped on them and having to submit it under their firm’s name!
It is not just during the claim process that Zeal’s team go the extra mile. We also provide advice and support for past clients, including when they come to sell their property, included in our fee. Zeal offer support to ex-client, helping them to maximise the tax benefit of the capital allowances remaining after sale. This generally involves working with the conveyancing solicitor and their accountant. Zeal will complete the capital allowances section of the CPSE document, provide any relevant contract clauses and prepare the capital allowances election.
Dealing with the capital allowances correctly on sale is extremely important. It is vital that expert advice is sought. By working with Zeal, our clients can rest assured they will be taken care of long after they have made a claim and paid our fee. The 5 star review we received from a client we helped last moth in these exact circumstances are testament to this.
“We made a claim a few years back with the help of Zeal and were really happy with every aspect of that. Now selling our business, we contacted Zeal just for some advice and got so much more. Zeal couldn’t have been more helpful, liaising with our accountant and solicitor at no additional charge and turning what could have been difficult into an easy, stress free process. Huge thanks”.
Kate Wilson, Francis Holiday Park
For help with Embedded Capital Allowances or Specialist Tax Advisory, please contact Zeal on hello@gozeal.co.uk or 01633 287898.
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