Hospitality Capital Allowances
[See our latest article in Luxury BnB Magazine credit Luxury BnB Magazine]
By Clare McKee, Hospitality Tax Relief Consultant at specialist tax consultancy Catax. Tel: 0121 293 1197 or Email: firstname.lastname@example.org
Investing in guesthouses and B&Bs can be an expensive business, yet so many owners don’t realise they can be a goldmine of tax benefits too.
One of the most overlooked incentives neglected by the hospitality industry are Capital Allowances (CAs). These are tax credits that allow firms to offset the Corporation Tax they pay on profits against the cost of physical assets within commercial properties. They can apply to everything from wiring and plumbing to boilers and specialist equipment, and they can be extremely lucrative.
A fantastic example of this came earlier this year when Compass Hospitality asked Catax to find out whether there were any hidden, unclaimed CAs among the properties in their portfolio of hotels. Catax identified three hotels where £1,225,000 worth of CAs had not been claimed, resulting in a windfall for the business of backdated tax credits worth £505,809.
One of the largest of these claims related to £878,000 of eligible CAs identified for drainage, water and electrical work carried out at the group’s Columba Hotel in Inverness, which resulted in a benefit of £159,149.
Umar Farooq, Group Commercial Manager at Compass Hospitality, said he had no idea quite how worthwhile a CA assessment could be. CAs can only be claimed on eligible items once, but new owners of existing properties are entitled to claim where the previous owners neglected to do so.
CA claims relate to any age property & any type of commercial building. A claim can be made at any time. The sad fact is that over 80% of CA’s go unclaimed.
“We didn’t think we’d get as much money as this,” said Umar.
“We thought the previous owners would have claimed more CAs themselves but they hadn’t and we really benefited from that.
“I think the problem is that there is a general lack of awareness in the industry about what you can claim for. You can’t just assume that accountants will pick everything up and, until you start really exploring your premises and their tax history, you have no idea how much money is just sat there waiting to be claimed.
“We got the money so quickly, and the process was seamless.”
OTHER REAL LIFE EXAMPLES INCLUDE:
• A Carlisle hotel bought for £2.4m where Catax identified £495,265 of CAs producing a total benefit of £92,732
• And a £485,000 guesthouse that was able to reclaim £17,000 for water, mechanical, communication and electrical installations, as well as internal fittings.