Hotels: up to 35% tax relief on the purchase price.
Are you aware of your Tax Relief entitlements?
There is an area of UK tax relief for owners or users of commercial property that is rarely maximised.
In addition to all of the investment benefits of investing in a commercial property, UK taxpayers that are subject to UK income or corporation tax may also benefit from substantial tax savings with capital allowances on plant and machinery embedded within their property.
This is in addition to the capital allowances on loose items that are typical identified by non-specialist.
A typical commercial property, complying with HMRC regulations can create a tax relief on the acquisition costs of up to 35% depending on the property type.
Purchase cost £5,000,000
35% of the purchase cost identified as capital allowances = £1,750,000
A UK 20% corporation taxpayer will benefit to the value of £350,000
A UK 45% additional taxpayers will benefit to the value of £787,500
Savills, the UK’s number 1 property services company, is able to offer BHA members and UK tax-paying owners of commercial property, the opportunity to reduce their tax bill through this specialist service.
Do you qualify?
For more information or for a free consultation, please contact BHA Business Partner, Savills.
Our proven multi–disciplinary approach utilises a combination of specialist skills combined with a well-established dialogue with HMRC built on years of submitting claims, negotiating and agreeing values.
With national coverage our specialist Capital Allowances Consultancy team are able to provide a high quality service to clients investing in and occupying new commercial freehold or leasehold property as well as advising clients either acquiring or disposing of second-hand hotels and restaurants.
We asked Michael Brownsdon from Savills specialist capital allowance team, BHA Business Partner, the following questions
How will a capital allowance forensic survey effect your clients profits?
Capital allowances claims reduce the corporation or income tax due, in effect our service increases our clients profits.
What is the level of unclaimed tax allowances Savills would typically expect to uncover?
We would typical expect to recover 30%-40% of the purchase price, 40%-50% of new build costs and 70%-90% of the refurbishment costs for our clients.
What is the main reason companies fail to claim their maximum capital allowance tax relief entitlement?
Typically the building and project information available to the person preparing the tax computations is incomplete. Plus, the person preparing the tax computations is often not familiar with construction techniques. The default tax treatment for building expenditure is non-qualifying. Non specialist accountants cannot be expected to identify the qualifying plant within a property as this is a specialist surveying process, not an accounting procedure
What type of plant and equipment qualifies for this tax relief entitlement?
There is no definition of plant in the legislation. Determining what is plant requires an understanding of the legislation and the history of tax cases to maximise the allowances available. ‘Plant’ has a wider use in tax than is does in the everyday use of the word.
You are uncovering millions of pounds in unclaimed tax allowances for your clients. Don’t you consider a capital allowance review just sound business practice?
Yes, claiming capital allowances is routine tax compliance. The difficulty arises where there is expenditure on a mixture of assets, such as in building projects. A forensic approach allows us to uncovered more allowances than a none specialist.
Would capital allowances already have been claimed by my company accountants?
In many cases a partial claim for capital allowances has been made. This is often on chattels (loose items) such as furniture & catering equipment. Embedded plant, such as electrical system and heating systems, are more difficult to identify, value and claim.
If a business have spent money refurbishing and fitting out my property. Is there any potential to make a claim against this expenditure?
Yes, refurbishing a hotel often leads to high tax recovery rates of up to 90%.
If a property was bought several years ago, is it too late to make a claim now?
No. There is no time bar to claiming allowances on historical expenditure, so long as you still own the asset.
I am considering selling my property why should I be concerned about capital allowances now?
Yes. The changes to the fixtures rules in April 2014 means that it is vitally important to get capital allowances in order prior to sale. Failure to do so may reduce the sale price.
The hospitality business is very high in qualifying plant and equipment yet still some of the BHA members have not undertaken this no win no fee opportunity. In a sentence why should they use your service.
Most business have claimed capital allowances, but only in a limited way; our service maximises the tax relief available, at no risk to the client.