Capital Allowances News

Capital Allowance Claims and Tax on Furnished Holiday Lets

April 4, 2011 at Capital Allowance Tax

If you are a person who owns furnished holiday lets in UK or Euro zone, you can reduce the tax you pay not only on the rents of property but also on the salaries and dividends you receive in UK. The savings can be substantial and can help cope with low exchange rates and weak occupancy rates. While there is no time limit for claiming tax allowances, there is a possibility that the government might change the law and you might lose the claim unless you act fast.

While you claim capital allowance from your taxable income on the full price of the asset in the case of furniture, computer systems and vehicles, the situation is very different in the case of property.

The price you paid for property has to be split into “First Fix” and “Second Fix” elements and allowances can be claimed only on the Second Fix items. And the valuation of second fix items cannot be based on guesswork; if you put an excessive value on these, HMRC might impose penalties for a wrongful claim; if you put too low a value, you lose a legitimate claim. Hence you need a tax expert who is also a valuation expert to help you with capital allowance claims on property.

Unless your accountant has acquired special expertise in property valuation, it is most likely that you have substantial unclaimed amounts. We can work with your accountant and help you claim what you are eligible for. And it can mean thousands of pounds in tax savings.

At least two million tax payers in UK are likely to own holiday homes either in UK or overseas. If the holiday homes are furnished and located in the UK or EEA, your property might qualify as a Furnished Holiday Let. Eligibility also depends on whether the property was available for holiday letting at least for 140 days (and was let out at market rates for 70 days) These figures are due to increase soon.

If your property qualifies, your capital allowance claim could even enable you ask for a refund of tax paid in the past. You can also carry forward the claim to future years.

Supplement your accountant’s expertise with ours and we would most likely be able to find unclaimed capital allowances, and consequent excess tax payments for owners of furnished holiday lets or FHLs. This expectation is based on our solid experience in the past.

If you had constructed the house yourself, you might have an idea of how much the Second Fix items such as air conditioning, kitchen fixtures and fittings, and numerous others assets cost. However, as is more likely, if bought the property as a whole, how will you identify and estimate all the varied fixtures that are eligible for capital allowances?

It is also not a simple question of valuation. Some items, such as electrical and water supply systems, might include both First Fix and Second Fix components. Only a valuation expert together with a capital allowances and tax expert, can help you make a sustainable claim.

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Values Shown are not guaranteed and have been based upon assumptions including that you have paid tax over the last two years to at least the refund amount shown and assumes all assets are in the 20% main pool of allowances. Some assets may be in the 10% integral features pool which will lower the annual amount claimable, however the total benefit of the allowances remains the same. The amount claimed will depend upon your personal circumstances and are shown above for illustration purposes only.

This calculator is for illustration purposes only.

If AIA is included in the calculations, we assume that no previous deductions within the AIA allocation has been submitted.

You cannot claim Capital Allowances before the year of purchase.

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