Author: Matthew Jeffery, Tax Director
Whilst most tax reliefs available to self-catering and serviced accommodation owners are claimed either automatically or through an accountant, there are some that are governed by more complex tax legislation that need specialist tax advisors and valuers to be able to claim. As a result, this tax relief is often overlooked and left unclaimed.
The tax relief is known as Capital Allowances for ‘embedded fixtures’ in and under business properties, including Furnished Holiday Lets (FHL’s). According to HMRC, 80% of eligible property owners are yet to take advantage of this specialist Government tax incentive and are unknowingly missing out on thousands of pounds in tax savings.
What are ‘embedded fixtures’ and how do they differ to regular capital allowances?
Embedded fixtures are items within the fabric of a building. Essentially, this is anything that would not fall out if the building was turned upside down. Qualifying fixtures can include electrical, water, heating and ventilation systems, pipework, drainage, kitchens/bathrooms, alarms and more.
To identify and quantify these allowances, specialist knowledge coupled with surveying and valuation skills are required to uncover the full value of qualifying expenditure as there are generally no detailed cost breakdowns available. Due to this, it is not something accountants typically claim unless they use external specialists.
Your accountant, however, will have claimed on everyday capital allowances purchases within your building that have receipts such as curtains, TV’s, fire extinguishers and furniture. If a technical survey analysing the property for capital allowances has never been undertaken, it is highly unlikely these allowances have been claimed.
What are the benefits of claiming these capital allowances?
Tax relief for embedded capital allowances are claimed on a proportion of the costs incurred to purchase, construct, convert or renovate a building. For self-catering properties, this is usually between 20% – 40% of the costs incurred. By claiming capital allowances on your property, you could:
- Reduce or even completely eliminate your upcoming tax bill.
- Receive a cash rebate for any tax that you may have overpaid in the last tax year.
- Unlock thousands in future tax savings that can be used to mitigate tax payments over the next few years.
If you purchased your property for £100,000+ and pay tax in the UK, it’s highly likely you qualify for this tax relief and are missing out on tax savings. If you built the property or converted outbuildings, you can also still claim. It also doesn’t matter how long ago the property was purchased, built or renovated.
How to choose the right capital allowances specialist?
So what can you do to make sure you choose a reliable and trustworthy capital allowances firm to investigate if your property contains unclaimed tax savings? Here are 4 ‘must do’s’.
✅ Due diligence
Doing your due diligence checks on any company you are looking to work with is good practice. If they are a limited company, find them on Companies House. Investigate their website, see how active they are on social media platforms and find out the history of the business.
✅ Check their tax credentials
Anyone can claim to be a ‘specialist’, but do they have the credentials to prove it? Are the firm you’re looking at Chartered Tax Advisors registered with the Chartered Institute of Taxation (CIOT)? Do not work with capital allowances firms that cannot provide accreditation of this or proof of professional indemnity insurance.
✅ Research previous client examples and reviews
Viewing Trustpilot pages or similar is a great way to see the service experienced by other business owners (in their own words) who have previously used the firm. It is understandable that not all reviews will be 5* however, check that the majority say positive comments. It is a good idea to also check out any negative reviews and read how the organisation has responded as this can provide further insight. Established providers should have 200+ reviews.
✅ Check their process
Numerous Capital Allowances firms offer a limited service, only completing a property survey and summary Capital Allowances Valuation Report (CAVR). They then pass the report to your accountant to figure out the tax implications, submit to HMRC and deal with any potential enquiries. This generates costly and unnecessary accountant fees.
First-rate Capital Allowances advisors do everything for you, providing a complete service. This not only includes undertaking the survey and preparing the CAVR, but calculating the tax, submitting the report (after you and your accountant approve it) and dealing with HMRC on your behalf, all at no extra cost. The best firms also include an aftercare service that provides ongoing support to help you apply your pool of future tax savings and retain them on sale of the property.
Do business better with Zeal
As experienced Chartered Tax Advisors and Property Surveyors, Zeal are the ‘go-to’ experts for making this type of claim. Here’s just a few reasons why:
- Working with Zeal is risk-free. Our service has no upfront costs plus we work on a success fee basis meaning we only take our fee if your claim is successful.
- Zeal provide a free consultation and technical property survey to identify the full value of qualifying items.
- Unlike other firms, Zeal don’t just prepare the Capital Allowances Valuation Report, we assign a dedicated case manager who will take you through the whole process, including submission, dealing with HMRC on your behalf.
- We also provide a professional aftercare service, included in our fee, to give you and your accountant any support you need in applying your tax savings to future tax payments. We’re here as long as you need us!
- 100% of our submitted claims to date have been approved by HMRC – resulting in very happy clients! This is reflected in our ‘Excellent’ Trustpilot rating.
HMRC will not just contact you and give you your capital allowances entitlement – you need experts like Zeal to identify and claim them. Contact us to find out if your self-catering property is hiding unclaimed tax relief.