Embedded capital allowance

[Otto]

Hi everyone, first post on here but long time reader. I did a search on the forum but couldn't find a thread that covered my query .

We have been running our holiday let since 2017 through a letting company. From the outset I was a little baffled by the capital allowance HMRC rules and have simply offset all the actual eligible costs against tax. Or so I thought (and have never had a tax advisor). This included all the furnishing costs including some items we purchased from the previous owner.

Now, my interpretation back in 2017 was that capital allowance could include embedded capital provided that had already been claimed (pooled etc.) by a previous business owner. As we bought a residential property for the purpose of holiday letting, I gave up on the idea of offsetting embedded capital against tax.

But advice I have seen recently is that embedded capital can be offset even if the property was not being run as a business at the point of purchase (at this point I feel either a bit daft or over-optimistic ). This is potentially at least 20% of the purchase price of the property, so a pretty big cost that has not been offset; as far as I can see there is no time limit to backdating a claim.

So I guess my query is whether anyone has experience of claiming embedded capital allowance (which AFAIK includes the value of fitted kitchen, plumbing, heating and electrical systems, built-in wardrobes, sanitary/bathroom/utility fittings etc.) ?

And secondly, has anyone tried to do this on their own? It seems like this would be a challenge and really in the domain of specialists. I see there are plenty of 'no-win-no-fee' law firms out there touting for business, some better than others no doubt.

Best wishes..

[newtimber]

I think you've answered your own question. It's a specialist area and you need an accountant who specialises in holiday lets.

[Otto]

Yes there's always an element of cognitive bias in wanting the right answer

But I do wonder how many owners realise the tax savings they can make on embedded value of the purchase price of their let.

And when they do there's potentially a hefty fee to pay for a specialist to claw the tax back (or provide future years of zero tax liability).

I can't help thinking that a simple valuation of embedded capital can be that difficult and perhaps a surveyor could do that for a few hundred quid as opposed to a big chunk of the total capital tax saving.