you own a HMO or Multi-let property, you may be able
to take advantage of Capital Allowances Tax relief,
to mitigate your previous and current year’s tax
you are an armchair property investor, entrepreneur,
or own just 1 HMO property, you could mitigate your
current liability, and also get a refund from HMRC for
previously paid tax!
Allowances – what are they?
& Machinery Capital Allowances, relate to the tax
relief associated with certain qualifying items within
the communal areas of HMO properties.
recently come into the limelight do to a technical clarification
by HMRC, these allowances are an extremely valuable
tax relief, and are ‘set-off’ against ANY
INCOME STREAM! You can reclaim tax paid up to 5 years
and 10 month previously – as long as you have
owned the property since then.
these items have been identified, valued and documented,
you can reclaim previously paid Income tax, reduce your
current year income tax liability, or roll forward the
allowances until such time when they are required, depending
on how long you have owned the property.
is no time restriction on claiming – a property
you have owned for 10 years, can qualify!
Allowances tax relief has been around, in one form or
another, since 1878. These are widely used by the commercial
sector and are also available to individuals who own
qualifying properties. Capital Allowances cover a number
of tax relief strategies including Plant & Machinery
Allowances has no impact on, and is completely separate
from Capital Gains Taxation or Wear & Tear relief.
& Machinery Allowances Relief
and machinery for HMO’s includes:-
and air-conditioning, lifts, wiring to fixed plant,
switchgear, emergency lighting, fire alarm installations,
sanitary fittings, hot water installation, carpets and
removable floor coverings, fittings and furniture, demountable
partitioning used for trade flexibility, firefighting
equipment, mechanical door closers, security equipment,
telecommunications installations, trade and information
signs, vehicle control equipment, window cleaning equipment
and assets used to create ‘atmosphere’ or
‘ambiance’ in a hotel, restaurant or public
list is by no means exhaustive but provides a guide
to the plant & machinery most commonly found in
addition, expenditure incurred on certain other assets
including fire safety, thermal insulation and building
alterations incidental to the installation of plant
and machinery may also be eligible.
The rate of relief varies from 100% in the year of purchase
(AIA / FYA), to 10% (WDA).
Who Can Claim?
be a UK Tax Payer (Either Income tax, or Corporation
Must incur the capital expenditure.
Must be ‘qualifying’ items of expenditure
or ‘qualifying’ buildings.
What Can Be Claimed?
Fit out works
Refurbishment or alteration works to existing property
Purchase of property
much can be saved?
between 15% and 25% of the purchase price of a HMO property
will qualify for Plant & Machinery Capital Allowances
Price Capital Allowances available (tax free income)
– these allowances are averages, based on previous
work undertaken, your property may attract more, or
less capital allowances. Your claim is based on purchase
price, qualifying expenditure, and the total communal
areas of the property. This is a guide only.
Great – How do I claim?
we have undertaken the financial assets survey of the
property, valued and submitted the claim report to you,
simply ask you accountant to amend previously submitted
tax returns, for historic rebates, or to include the
valuation within the current year tax return.
relief gets ‘set-off’ against your taxable
income, therefore reducing the tax you pay.
at Exact Business Services Ltd, offer a ‘No-money
down’ option to HMO and Multi-let owners who have
paid tax previously. Contact Arthur Kemp at Exact Business
Services Ltd to find out more, and to see how this works.
work is issued is adherence to strict HMRC guidelines,
and is seen through to remittance.
For further information or to arrange a survey on YOUR
HMO properties, drop us an e-mail at email@example.com
or visit our website at www.hmotax.co.uk
study of Capital Allowances for Adam & Frances Long.
Adam and Frances Long are property investors, with a
substantial portfolio. They own single rental units,
HMO properties as well as a block of flats in London.
Adam and Frances have been investing in property for
over 10 years and have a varied portfolio spread across
the country. They specialise in providing housing solutions
to those who cannot obtain finance in the traditional
manner as well as assisting homeowners who are struggling
to sell due to negative equity or debt problems. By
using advance financing methods they are able to free
the homeowner from his burdens within 7 days or less.
Adam and Frances were intrigued by the fact that Capital
Allowances can be used to reduce their overall tax liabilities.
I explained that these allowances can also be used against
any other income stream, which was pertinent, as both
Adam & Frances have alternative sources of income,
apart from their properties.
I agreed to attend one of the Long's addresses in London
which housed 9 separate private flats. The building
was purchased for around £1.2M and is located
in Islington. I explained, prior to my visit, that Capital
Allowances tax relief does not apply to 'dwellings'
and as such, only certain Plant & Machinery items
within the communal areas of the building, would qualify
for tax relief.
Having undertaken the financial assets survey of the
building, it was clear that the only communal areas
of the property were the access hallways. These housed
the utility meters had lighting, some soft furnishings
and fire precaution installation. Although not a large
claim due to the relatively small communal areas, qualifying
assets of £35,000 were identified, and could therefore
be used to mitigate their tax liabilities.
I had also explained that once the assets had been identified,
logged and valued, one could use these allowances to
amend previously submitted tax returns. This means that
refunds of tax paid can be recovered. The time limitation
is restricted to ownership of the properties or 5 years
and 10 months. This can be a very valuable tool, as
it can mean potentially large sums of money can be recovered.
The following week, I arranged to meet Adam & Frances
at their HMO properties located in Bishop Stortford,
and Chelmsford. All of these properties are what I consider
to be 'traditional' HMO's. They have private rooms for
the tenants, but all share a Kitchen, Bathroom, WC,
storage, access, lounge and dining areas.
All 3 of these properties were purchased directly from
the developer, and are completed to a very high standard.
of allowances were identified over the three properties.
This represents around 19% of the combined purchase
The allowance of £120,000 is treated as a business
expense, and can be 'set-off' against general income
of the individual. Effectively, extending ones tax free
income by £120,000. If one was a higher rate tax
payer, this would currently represent £48,000
in taxation savings or refund.
As Adam and Frances are join owners of these properties,
the Allowances are usually split 50:50. However, if
partners were to enter into a 'partnership agreement'
(under the guidance provided by HMRC in “PIM103
– Introduction: Jointly owned property & Partnerships”),
then the allowances can be apportioned on the basis
of the agreement. This would mean that all of the allowances
could be allocated to the higher/only tax payer of the
couple. A useful tip!
contact Adam & Frances Long to discuss how Capital
Allowances have been utilised, or to discuss their property
provisions, please call 01992 660 391 or e-mail firstname.lastname@example.org
or visit their website www.quickbuyhomes.co.uk
further information regarding Capital Allowances, please
review www.hmotax.co.uk or e-mail at email@example.com
or call 01733 248 706.
help with your tax return? Visit
the Tax Advisors Directory page!