Capital Allowances - integral features

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
cooperman
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Joined: Sun Jul 30, 2017 9:40 am
Location: Arundel

Capital Allowances - integral features

Post by cooperman »

Dear all, I have just bought a property in Arundel and will, after some refurbishment works, begin holiday lettings next month. I am aware of most tax issues but I wondered if anyone had claimed CA's on the value of their integral features (value of heating sytems, lighting,fitted kitchens, bathrooms etc). I have found several Accountancy firms offering their services (at high cost I might add) to assess the % of CA's in the purchase price of a FHL. It appears that this sum, which some firms claim to be as much as 25% of the property's value, can be offset against tax meaning the likelihood that no tax at all would be paid for years! See the article here. http://www.curtisplumstone.com/fhls/?gc ... AnWw8P8HAQ

Id be interested to hear if anyone had claimed such costs and HMRC's response? Any Accountants out there? Regards, John
rosebud
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Joined: Wed Mar 14, 2012 5:24 pm
Location: Steyning, West Sussex

Post by rosebud »

My accountant said I should claim for 10% of the price I paid for the property... which is what I did...
cooperman
Posts: 5
Joined: Sun Jul 30, 2017 9:40 am
Location: Arundel

Post by cooperman »

Thanks for that Rosebud. That seems low enough for HMRC not to challenge. It will be interesting to hear other forum members experiences. Steyning, nice town too, not far from me!

Regards,

John
loveka
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Joined: Fri Aug 19, 2016 10:32 am

Post by loveka »

Given what we spent doing ours up, it will be Yeats until we make a profit.

I am still a bit confused about what I can claim as capital allowances. The chimney fell down while we were having a stove put in. I assume I can't claim for that? It ended up costing around £5k.

And capital allowances can be spread over several years?
cooperman
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Joined: Sun Jul 30, 2017 9:40 am
Location: Arundel

Post by cooperman »

I think often people misunderstand the difference between capital expenses ie. cost of things you buy once you own the property and some capital allowances, which are the value of integral features that are part of the cost of property when you originally bought it. Rosebud mentions that her Accountant suggested claiming for 10%. Has anyone claimed more than 10%. Google searches find "Accountants" suggesting their services could establish a legitimate claim of up to 25%!
Puffin Lodge Filey
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Post by Puffin Lodge Filey »

That's interesting. We paid £10k for furniture, carpets, curtains etc when we bought our house. Do they count as capital allowances?
Life isn’t about waiting for the storm to pass… it’s about learning to dance in the rain.
SusanMay
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Location: Dorset

Post by SusanMay »

I don't want to hijack this thread but i had it in my head that the benefit of claiming a capital allowance when you buy a FHL could lead to a larger tax liability when you end the FHL business or when you sell it.

Just done some googling too and found this:
"There are some pitfalls to watch out for in respect of making such a capital allowances claim. In particular what happens if the furnished holiday letting is sold at a later date or is changed to being let on a long term basis. The starting point is that on a disposal of a furnished holiday letting then the sale proceeds need to be brought into the capital allowances computation and a balancing charge or allowance will arise. If a large loss claim in respect of integral features has been made in the past then it is likely that there will be a large balancing charge at the time of sale. So whilst a large income tax repayment could be obtained now, on disposal of the property the concern is that the benefit of that income tax repayment would be clawed back and so a large tax liability would arise at that point. For this reason many clients have been reluctant to make such capital allowances claims."

It's from http://hls-solutions.com/capital-allowances. (I see it says 10 to 30% here!) It may be out if date but perhaps something to look into before going down the capital allowances route.
cooperman
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Joined: Sun Jul 30, 2017 9:40 am
Location: Arundel

Post by cooperman »

I had read something like this myself whilst researching the subject and it's certainly something to bear in mind. I suppose it depends on whether one wants to benefit in the short term without looking too far ahead or indeed whether there is an intention to keep the FHL operating for life?
sparkJS
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Location: North Cornwall
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Post by sparkJS »

The rules changed in 2014 and you can only claim capital allowances on a property purchase if it is agreed with the seller and you confirm that they have 'pooled' the assets themselves, essentially this means that if they treat the integral features as capital assets and claimed the allowance themselves. They will be subject to tax on the sale of same assets when selling to you and likewise you can claim the allowance yourself.

I guess the assets have to be valued as part of the sale and should be negotiated during the purchase of the property or could be done retrospectively.

It might not be in the sellers interest to agree to this though.
MG
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