Share this content
13

Capital Allowances on Buy to Let Properties

Capital Allowances on Buy to Let Properties

Didn't find your answer?

Returning from holiday on Easyjet I noticed an advert in the flight magazine which stated that from December 2008 you can claim up to 20% per annum capital allowances on the purchase price of buy to let property from tax year 2008/2009, this will not increase your CGT liability when you sell and can be offset against other income which may therefore produce a tax repayment as well as reduce your tax bill.

Sounds to good to be correct or have I missed something? Comments please

Replies (13)

Please login or register to join the discussion.

avatar
By Phil Rees
22nd Oct 2010 15:16

Easyjet eh?

I wonder what Ryanair have to say on the subject.

Thanks (0)
avatar
By holywood
22nd Oct 2010 15:35

It's all about FHLs

Obviously the advert is not referring to residential property which is deemed to be a 'dwelling house' but will be referring to the EU forced amendments to the Furnished Holiday Lettings rules which apply to EEA and UK properties held for short-term 'holiday' lets.

The availability of CAs has no effect on the CGT position of the property, and because the lettings are deemed to be a 'trade' any loss may be offset against other income.

I believe AccountingWeb have produced several articles on this point in the past few months.

I am not sure whether many folk hold commerical property as 'buy to let' but of course you could claim CAs on these too!

 

Thanks (0)
Teignmouth
By Paul Scholes
23rd Oct 2010 16:29

May not be about FHLs

Hi - I asked the same question a few weeks ago and my query concerns the loophole in the definition of "dwelling house" that some are seeking to exploit for expenditure after 5 April 2008.

Have a look at:

https://www.accountingweb.co.uk/anyanswers/capital-allowances-buy-let-properties

Thanks (0)
avatar
By recoup
25th Oct 2010 18:37

FHL capital allowances

You can indeed claim capital allowances on Furnished Holiday Lets. There are some conditions detailed here;

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRe...

Some accountants advise that you write down the value of the property etc, which DOES affect your CGT liability in the future - but this isn't what you're talking about.

The process your talking about is to do with the purchase price of the property plus the value of the fixtures and fittings. A typical calculation for your tax relief could be;

Value of property: £300k

Capital Allowance figure: £100k (based on survey etc)

Cash benefit for 40% tax payer: £40k

If you've been paying tax for the last couple of years, you might be able to get a cheque back for £10-15k, and offset the rest against tax payment over the next couple of years.

Andy

[email protected]

www.recoupcapitalallowances.co.uk

 

Thanks (0)
avatar
By holywood
26th Oct 2010 10:14

Dwelling Houses / FHLs

@Paul Scholes - I didn't see this discussion previously!

HMRC are currently in the process of issuing new guidance on this subject, further to consultations following the much-maligned Revenue and Customs brief 66/08 regarding the definition of the 'dwelling house'.

Expect an update in the coming weeks....

@recoup - Nice advertisement Andy, apparently 94.6% of statistics on websites equate to very little factual information.

Thanks (0)
avatar
By lauren69
26th Oct 2010 14:26

HMRC have now issued the appropriate guidance

 Until 22.10.10 it was possible to claim capital allowances in respect of capital expenditure incurred in the communal areas of certain multi-let properties. The ability to make such claims came about as a result of RCB 66/08. However, following a CIOT submission to HMRC (TDP 67/10 on 14.07.10), this guidance has been superseded by RCB 45/10 -  http://www.hmrc.gov.uk/briefs/income-tax/brief4510.htm. It still remains possible from 22.10.10 to claim capital allowances for capital expenditure in certain communal areas of multi let properties but the guidance specifically denies relief in respect of kitchens and lounges. 

The guidance also clearly indicates that it remains possible to claim capital allowances for capital expenditure in respect of ALL communal areas of qualifying multi let properties if the expenditure was incurred between the dates of the two sets of guidance, 29.12.2008 and 22.10.10. 

My take on the original and revised guidance can be viewed at http://www.propertytaxadvisers.co.uk/

Thanks (0)
Teignmouth
By Paul Scholes
26th Oct 2010 23:19

Nice one

Many thanks Lauren69 (wish I had a name like that!)

Thanks (0)
avatar
By lauren69
27th Oct 2010 09:06

Multi-lets and capital allowances

 It's my daughter's name. It doesn't quite go with my photo but at least you will remember me! 

Thanks (0)
avatar
By holywood
27th Oct 2010 10:51

Re:

Thanks for posting Lauren69.

Just to let you know, the date mentioned in your first paragraph of analysis needs amending.

Also, I am not sure whether the assertive language used is really necessary, the HMRC brief represents their interpretation only - it is not in the legislation.

 

 

Thanks (0)
avatar
By palmtrees
31st Oct 2010 14:51

You hadn't been drinking!

You might have not had a drink but it looks like the boys at Hedge Tax Mitigation 0121-228-7178 might have had a few when they wrote their advert. "you could claim 20-25% of the purchase price as a tax allowance (on anything except one bedroomed flats)" ... "unsurprisingly  HMRC didn't spend any money on advertising this to ensure you made your claim"  no mention of only applying to commercial property. They also say " this is a very specialised area,.... and the vast majority of accountants do not carry out this work". Perhaps there's a reason they don't...  I suggest contacting Hedge Tax Mitigation and asking them for clarification. It'll be good if it's true!

Thanks (0)
Nichola Ross Martin
By Nichola Ross Martin
01st Nov 2010 13:40

There has been a lot of debate on this already

this article explains the position on dwelling house with links to more information. http://www.rossmartin.co.uk/index.php/sme-tax-news/35-sme-tax-news/486-capital-allowances-hmrc-clarifies-meaning-of-dwelling-house

When you buy a property you are treated as being the person who purchased its internal plant and so if no one claimed allowances on it in the past you may be able to make a claim in the future. You can only claim allowances on plant used in the communal aread of flats etc, if those areas are not part of the area that comprises a dwelling house.

Thanks (0)
avatar
By memyself-eye
19th Nov 2010 10:39

O'Leary would

Lock them all in the aircraft and leave them on the tarmac.

I was on an Easyjet flight too....

Thanks (0)
avatar
By LindseyS
24th Nov 2010 10:43

Minimum Value Applies?

I looked into this but it appeared that property needs to have cost a minimum of £150k (UK) or £300k (EU) ... is this correct?

I have a furnished holiday let in the UK, purchased 2007, and a leaseback in France, purchased 2009, but both are under this value, so I have never pursued it.

Can anyone confirm, or otherwise?

Thanks (0)
Share this content

Related posts