Accounting private use of Furnished Holiday Let

How do you take private use into account for FHL capital allowance claim?

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In the first trading year of an FHL the owner used the property for about 1 month for personal holidays. There is a large AIA claim to make for fixtures, fittings, furniture, etc of about £40k. Can a 100% AIA claim be made or does it have to be reduced to 11/12ths of total cost? What if owner doesn't visit himself at all in Year 2, 3, etc? Any thoughts, or even actual expertise, gratefully reeived!

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Replying to David Ex:
DougScott
By Dougscott
24th Jan 2023 13:56

I can't see anything here which is why I asked. Under VAT rules for commercial property, where there is a large VAT reclaim on property, where there is a partial exemption element to the income related to that property, then an annual adjustment is made for 10 years after the purchase to reduce/amend the VAT claim. I was just wondering whether anything similar applied to AIA claims (as opposed to WDA claims).

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By Laurence52
24th Jan 2023 09:03

Per https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4115
If plant and machinery on which capital allowances are claimed is partly used for private purposes (for example outside the holiday letting season) an appropriate fraction only of the capital allowances will be due, as with any capital allowances claim where there is private use.

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By Laurence52
24th Jan 2023 10:10

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca27005
refers to where assets are partially used for business use.
The proportion to use is on a "just and reasonable basis"
For the first year, it's unlikely that the private use proportion in future years can be quantified thus a 1/12th disallowance seems appropriate.
The assets go in a single asset pool. Any adjustment for the overall private proportion is made on disposals on any disposal proceeds.

There's the option of claiming WDA each year rather than AIA in the first year which would then allow for no disallowance in years with no private use but then that may not be an attractive option if it means that the client gets tax relief at a lower rate as a result.

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Replying to Laurence52:
DougScott
By Dougscott
24th Jan 2023 14:07

Yes, thanks, I have no trouble in seeing how it works with WDA, but not sure about AIA.

For example say there is no private use in first year and 100% AIA claim made, but then there is say 1/12th private use in second year and so on? I suppose by the WDA logic you would just keep a note of private use percentage for each year until disposal/write off and then add back the calculated private use element as a balancing charge?

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By Rammstein1
24th Jan 2023 16:22

CA23087

Example 1 is good.

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