Furnished Holiday Lets are a great way to invest in property and can be very lucrative. They also benefit from certain tax breaks that regular residential properties do not benefit from, namely Capital Allowances.
What are Capital Allowances?
Capital Allowances are basically tax relief that you can claim on certain items or expenditures related to your business. They are a tax relief designed to incentivise business owners to improve their commercial properties. They have been around for decades and are a well-recognised part of the UK tax landscape. They are allowances that provide relief to tax for expenditure incurred improving a commercial property, including holiday lets. Any item of expenditure which has an “enduring benefit” to the business can qualify for relief.
Embedded Capital Allowances are massively valuable to the property owner. They can be claimed on the fixtures and fittings within the property that are integral to the business. For furnished holidays lets, this means that items such as boilers, installed kitchens and bathrooms, double glazing, etc. can all be eligible for Capital Allowances which can get you a tax refund or savings against a future tax bill.
So, if you are thinking of investing in a Holiday Let – or you already have one – then it is definitely worth considering taking advantage of the Capital Allowances that are available to you.
You can learn more about Embedded Capital Allowances in our guide.
How does my holiday let qualify for Capital Allowances?
There are complicated rules concerning Capital Allowance claims for Holiday Lettings and Rentals which put most people off claiming them.
Examples of these include:
Rules on whether a building qualifies as a Furnished Holiday Let (FHL).
Rules concerning whether it fulfils the 3 “Occupancy Conditions” in order to qualify.
Whether it fulfils the “pattern of occupancy condition”.
Whether it fulfils the “availability condition”.
Whether it fulfils the “letting condition”.
Rules on whether the furniture can be claimed for in Furnished Holiday Lets (FHL).
The separate calculation of Profit and Loss from Furnished Holiday Lets (FHL).
Whether or not you need to use your “period of grace”.
Full details of whether your holiday let qualifies for a Capital Allowance claim can be found on the Government website here.
What can I claim in my holiday let as an Embedded Capital Allowance?
“Embedded” Capital Allowances or “Property Embedded Fixtures and Fittings” are items that are part of the fabric of the building which are screwed in, bricked in, nailed in, and plastered in. They are items that are regularly missed by standard accounting practitioners and a could be a source of a considerable financial award for you. Within a Holiday Let at £350,000, there may be as much as £70,000 in unclaimed Capital Allowances. For a property owned by an individual that equates to a tax refund or future saving of as much as £28,000.
In most cases, claimable items within a furnished holiday let could be:
Heating and Lighting Systems
Entry and Exit Systems
Emergency Lighting and Fire Detection Equipment
Fitted kitchens and bathrooms
Items such as these in the property could give rise to a capital allowance totalling on average 25% of the value of the property.
How can I start my claim?
There are complicated rules concerning capital allowance claims for Holiday Lettings, but our team can take the stress of trying to understand the ins and outs off your plate. We can manage the whole process from consolation to refund.
At Property Tax Refund Centre, we are specialists in identifying items in your furnished holiday let that qualify for Capital Allowances.
If you have a Holiday Let and would like to see whether you qualify for a Capital Allowance Claim just contact us however you feel most comfortable and we will be in touch to get the ball rolling.
How do I get started?
Just contact us however you feel most comfortable and we will be in touch to get the ball rolling.