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If you own your nursery, pre-school or other early years facility, you could be due a tax repayment and future tax savings from HMRC.
Identifying and unlocking these tax savings requires experts in surveying and a form of tax relief known as ‘capital allowances’.
As it is not a service provided by an accountant, many owners of business properties have not made a claim and are completely unaware of the tax savings they could be benefitting from.
What are capital allowances?
Capital allowances are a form of tax relief for plant & machinery used in your business. Your accountant will claim capital allowances for you on items like cars, furniture, computer equipment etc to reduce your taxable profits.
Capital allowances CAN’T be claimed on buildings, but they CAN be claimed on ‘Fixtures’ embedded within the fabric of the building. Items like electrical & heating systems, kitchens and bathrooms, even the door handles and carpets.
Essentially, if the property was turned upside down, it’s the fixtures that did not fall out that would qualify.
Capital allowances are available to all business, whether you are a sole proprietor, partnership or a Ltd company.
Landlords of commercial properties can also claim.
Why are they underclaimed?
When you buy a building (or even build an extension), the price for the different fixtures embedded in that building are not itemised out! A surveyor is required to assess the values for capital allowances claims.
Capital allowances within buildings is also a specialist area of tax legislation that is often overlooked or misunderstood by accountants and tax advisors. It’s not new and it’s not a tax scheme, it’s just historically only been claimed by the biggest businesses and wealthiest investors.
Another common misconception is that making this type of claim would affect the capital gains position at the time of sale. In fact, this is not the case. You may still claim the full price you paid to buy the property against the sales proceeds even if you have claimed capital allowances.
What does this mean for childcare property owners?
Capital allowances can provide substantial tax savings for childcare property owners. For buildings that qualify, a claim could result in a tax deduction of typically 25% of the original property purchase price (or construction cost). In some cases a cash tax refund can be claimed for tax that has been unknowingly overpaid.
Making a claim
You are probably thinking this sounds really complicated and time consuming! In fact, it really isn’t!
All that is required is a copy of your latest accounts and tax returns.
A surveyor would also visit the nursery to carry out a site survey. A detailed report is then prepared that is submitted to HMRC to support the claim for tax relief.
How do I find out if I can make a claim?
To maximise your claim and ensure you stay compliant with UK tax legislation, it is recommended that you contact a specialist firm. A capital allowances tax specialist will be able to quickly identify whether you can make a claim and how much you could be due back.
There is no time limit to make a claim providing you still own the property and the fixtures in the tax year you submit the claim. This means that even if you bought your property in the 1980’s, 90’s or sold it up to two years ago, you may still be able to make a claim. A claim may also still be possible if the original fixtures have since been repaired or replaced.
It’s worth noting that this is not something an accountant would usually claim due to the need for specialist tax knowledge and surveying skills. Much like a GP would refer a complex case to a medical specialist (such as a radiologist), sometimes accountants need support from tax specialists to ensure the best possible outcome is achieved.
Finding a capital allowances specialist
There are a handful of firms in the UK that specialise in making this type of claim. When considering the options it is recommended that you do your due diligence to ensure that the firm chosen has the right level of expertise as well as providing excellent customer service.
Always check their credentials. Look for firms who are registered with the Chartered Institute of Taxation (CIOT). Do not work with firms that cannot provide accreditation or proof of professional indemnity insurance.
Another good source of judging a firms’ credibility is to ask for previous client reviews or testimonials. Using online review sites like Trustpilot is a good way to understand the service experienced by other business owners.
Credible capital allowances advisors will also offer a full end-to-end service – not just provide a report. A full service would include undertaking a survey, the capital allowances report, calculating the tax and dealing with HMRC on your behalf. The best providers will also include an aftercare service with on-going support to help when it comes to applying the tax savings to future tax payments.
This article was written by Jay Hogan of Zeal Tax, a leading capital allowances specialist in the UK, to help ÎÞÂëÌìÌà members understand their tax relief entitlement.
You can contact Jay by calling 01562 60777 or email jay@gozeal.co.uk.
Zeal Tax offers a free, no obligation consultation and estimate of the tax savings and refund you could achieve.
Plus ÎÞÂëÌìÌà members receive a 10% discount on their fee. Members can find the discount count in the Members' Area on the My EYA portal.
