Capital allowances for hospitality businesses
Is your hospitality business missing out on valuable Capital Allowance reliefs?
It is estimated that half of all hotel, pub and restaurant businesses in the UK are missing out on thousands of pounds worth of capital allowance tax relief.
Capital allowances are available when you buy, build or refurbish commercial property. For hospitality businesses this could include anything from the kitchen equipment, lighting, decor, fit-out or even the air conditioning or hot and cold-water systems in the premises the business operates from. This is true for both owned premises or for buildings with a long lease.
And things are looking up…
In the 2018 Budget, the Government announced an increase to the Annual Investment Allowance (AIA) from £200,000 to £1m per year.
The AIA allows you deduct 100% of the costs of ‘plant and machinery’ you purchase from your annual taxable profit for the year, up to the annual limit. That’s up to £200,000 of corporate tax relief in the same year you incur the costs.
For the hospitality industry the following items could qualify for capital allowance claims:
New developments – new builds or the extension of an existing premises. By involving a tax advisor in the construction planning phase, the tax relief process can be managed proactively to make the most of reliefs. A new ‘Structures and Buildings Allowance’, for newly acquired commercial buildings, is now available to give relief against tax over a 50 year period for the costs of the actual building itself. This only applies to new construction costs incurred after 29 October 2018.
Buying or selling an existing commercial property – it is important to make sure the seller has captured any reliefs already in the building, or the new purchaser will be limited in what further reliefs can be claimed (a “pooling” requirement). It is worth making sure you have maximised your own reliefs before passing these opportunities to a new purchaser. If you are buying, being aware of the available reliefs will ensure you do not miss out on future claims.
Renovation of existing buildings – expenditure on refurbishments, alterations and fit-outs should be carefully reviewed to make sure you maximise the tax reliefs available.
Plant and machinery costs – qualifying items such as kitchen equipment, furniture, tills and other computer systems as well as building fixtures, such as kitchens and bathrooms could also be claimed for.
More than the limit?
When a business spends more than the qualifying limit, additional expenditure generally attracts additional annual writing down allowance depending on the type of asset. This will be reduced from 8% to 6% from April 2019.
How to claim
Calculations for claiming capital allowances are complicated. Most business owners who own commercial property are unaware of the potential benefits on offer.
To make the most of any claim, it is worth enlisting the help of a professional advisor to fully investigate the claims potential. Variables such as accounting period and taxable profits need to be considered, and expenditure needs to be examined carefully to ensure all claimable assets are included.
We work with experienced surveyors and a free of charge consultation can be organised. Work can be done on a contingent basis, so the fee is linked to any tax savings made.
What to look out for
Even if you don’t have enough taxable profits to benefit from capital allowances it is still worth investigating the claims process. If you identify the capital allowance now, you may be able to;
- claim them in future years,
- set them against other companies if your business is part of a group.
It is worth noting however that only one claim for AIA can be used in a group of companies or individual companies under common control.
If you are a UK tax payer who owns or is planning to buy business premises, we can help you make the most of capital allowances, so you claim all the tax relief you’re entitled to.