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As many as nine in 10 properties being used for commercial purposes in the UK are eligible for capital allowance tax relief that has never been used. The allowance is a form of relief available against any capital expenditure made buying, renovating or making adjustments to a commercial property. Additionally, there are some circumstances where the reliefs can be applied to buy-to-let properties as well. To qualify, residential properties should be shared flats or houses with two or more bedrooms, worth £100,000 or more and owned by UK taxpayers (individuals, UK trusts and UK companies) paying income tax at a rate of 40%.
At Fincorp we have a good working relationship with capital allowance specialists, Inventive Tax Strategies, who have been helping landlords reclaim income or corporation taxes previously paid and reduce their future tax liabilities for years. In their opinion it is possible to reach as much as 8% of the property purchase price for residential properties or up to 15-20% on commercial properties.
Beverley Loggia, sales director at Inventive Tax Strategies, says many qualifying UK landlords can claim capital allowances, including those with student lets, professional shares, and more traditional HMO lets.
In some circumstances that can mean there are tens of thousands of pounds worth of rebates available to the property owner, because this tax relief can be backdated to the year the property was purchased. One of the main reasons so many properties haven't taken advantage of the tax relief is because of the complexity of the claim process - your typical accountant won't necessarily know that relief is even available, much less how to go about claiming it.
The process with ITS is genuinely straightforward. They carry out a free initial capital allowances assessment after giving them some basic property and income details, and if this is promising and you wish to proceed, they appoint a surveyor to carry out a specialist plant and machinery survey to provide an unbiased valuation of the qualifying assets within the property.
"In addition, a due diligence process is undertaken to ensure previous owners have not already claimed in order to confirm your entitlement to claim," says Beverley. "We are confident that we can save tax on your property assets, hence our initial no-cost review to ascertain the potential extent of the tax savings available. Once determined we will agree a fee structure that suits you, normally between 3% and 7% of the capital allowances amount identified."
Finally, a claim report for submission to HMRC is compiled and sent to you and your accountant. The report is of a format commonly accepted by HMRC, highlighting the applied legislation, confirmation of ownership, entitlement to claim and the amount.
Dr Smith had built up a portfolio of properties purchased throughout the past decade. The buy-to-let properties were let as multiple tenancies to students. Over 10 properties had been purchased. In addition, he claimed on his surgery premises. With help from ITS, Dr Smith was able to present a claim for capital allowances for the 2010/11 tax year of £74,309. As result in December 2011 he received a tax rebate of £30,853. He paid a fee for this service which itself was a professional expense and was tax deductible.
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