Changes in legislation have focused property owners, and their advisor’s attention in recent years resulting in a wider awareness of the concept. This has lead to an increase in demand for advice as a key component of our support is knowing how to apply complex legislation to complex property scenarios.
Do the following scenarios relate to you or your clients:
- I live abroad and receive rental income from property in the UK carrying out a commercial function e.g. office, furnished holiday let, care home, etc?
- I live in the UK and receive income from overseas property (in the EEA – European Economic Area) that are carrying out a commercial function e.g. furnished holiday lets, etc?
If the answer yes, has the maximum tax relief been secured against the cost to acquire and improve those properties both in the UK and EEA?
Look Further, Look Deeper
There’s no doubt you and your advisors have an established routine for assessing Capital Allowances and therefore it’s important to stress that we’re not questioning anyone’s ability.
We look to enhance the level of Capital Allowances claimed by introducing additional disciplines that add value to accountants’ work. For example, a survey completed on the property will identify items that are not visible within the paperwork and sit within Land & Buildings on the Balance Sheet (not Fixtures & Fittings).
Probably the most commonly heard misconception is the view that any savings achieved by claiming capital allowances will be canceled out later by an increased chargeable gain (if, of course, the property is ever sold). This is not true and made clear in s41(1) Taxation of Chargeable Gains Act 1992 (TCGA 1992). Section 41 TCGA 1992 therefore specifically provides that it is not necessary to deduct any capital allowances from the cost of an asset for capital gains purposes, so it is not possible for a Capital Allowance claim to create or increase a chargeable gain. Furthermore, claiming capital allowances also has no effect on the calculation of any capital gains indexation allowance that may be claimed.
The case study below provides a simple example of an overseas furnished holiday let in Corsica.
We identified a substantial amount of capital allowances claimed against the purchase cost.
5 December 2023
Capital Allowances ManualCapital allowances play a significant role in taxation. Allowing businesses to claim deductions for the depreciation of their assets. Among these assets, plant and machinery are frequently mentioned. However, the term “plant and machinery” is not explicitly defined in tax law. It should also...
22 November 2023
Autumn Budget 2023: Changes to Capital AllowancesThe Autumn Budget of 2023 has arrived, and with it comes significant changes and developments the government has put in place. Chancellor Jeremy Hunt delivered the statement on Wednesday, 22 November 2023. For businesses and individuals alike, these adjustments in tax policies can have far-reaching implications.
Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.