What’s new?
Property News
 

Follow us:

© Andaine Limited 2011.
All rights reserved.

Capital Allowances:

> Does the Taxman have a cheque with your name on it?

A quick guide on Capital Allowances

What are Capital Allowances? Capital Allowances are effectively the tax equivalent of depreciation. In certain qualifying buildings, such as Commercial Property, Furnished Holiday Lets or Houses in Multiple Occupation, there will be items which you can claim capital allowance tax relief on, for example; heating systems, sanitary ware and wiring. This is not a tax loop hole or a tax scheme, it is your statutory right to claim capital allowances tax relief. Capital allowances can be offset against income from any source, not just rental income.

Why haven't you heard about this before? HM Revenue and Customs have allowed Capital Allowances on property since 1878 but the legislation has only recently been revised in December 2008. Unsurprisingly, the Inland Revenue has not spent money promoting these allowances to ensure you make your claim. In addition, this is a very specialised field, spanning accountancy and surveying. As there are penalties from the Inland Revenue if the work is done incorrectly, the majority of accountants won't undertake it, and most don't even know it is possible. Don’t worry, the fact that you may  have used the same accountant for many years doesn’t matter, you do not need to replace him or her, but to access this tax relief you do need the services of a specialist that can add value to what your existing accountant does. The Capital Allowances specialist will send a report to your accountant once a survey of your property has been carried out so that he can make the claims on your behalf. If you don't have an accountant however, then we will be pleased to recommend one to you from our panel

How much can you claim? If you own qualifying property in the European Economic Community and pay income tax in the UK on income from any source, whether PAYE or  self-assessment, you may be able to reclaim some or all of the tax you paid in 2008/2009 and 2009/2010, as well as reduce the tax you pay this tax year. The tax relief you may be able to claim is typically 10 to 25% of the purchase price as a tax allowance on any qualifying properties in your portfolio. As an example, that means on a £200,000 property you would could have an allowance, or tax free income, of £40,000, which can be claimed against income tax you have already paid or against income tax due in future years, depending on when you bought your property, and how much tax you have paid.

If you think you may qualify and would like to find out more, Click Here.