FHL Cash basis Capital Expenditure

Scope of deduction for capital expenditure when opting for the cash basis for a UK FHL

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Hello, I'd welcome comments on whether I've correctly understood the legislation for claiming relief for capital expenditure when using the cash basis for a UK FHL.   Capital allowances are only available to FHLs using the cash basis in respect of cars.  For other, eligible capital expenditure, a deduction is available in the year of expense. My understanding is that this eligible expenditure excludes (amongst other things) assets which are non-depreciating assets.  i.e. relief for expenditure on, say, integral features, is only available where the accruals basis is used and capital allowances claimed. What has confused me is the wording in PIM1092 which states that "However, the special rules for capital expenditure differ between GAAP and cash basis. When calculating profits of a furnished holiday let using GAAP, capital allowances can be claimed for capital expenditure on plant and machinery (e.g. furniture). When the cash basis is used, the full amount of capital expenditure can be deducted from the profits of the tax year when the expenditure is actually paid." This suggests the categories of expenditure where deductions are available are the same, just that the method of giving relief is different. I know it's probably just misleading / shorthand, but I thought I'd check.  Perhaps it's because they say "(e.g. furniture)", and the answer is different for, say, heating systems / integral features. 

Thanks in advance

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By The Dullard
05th Nov 2020 09:39

Read s 33A.

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