Tax savings for private rented sector: what you need to know
With the continued popularity of buy-to-let investment there are potentially a significant number of property owners sitting on unclaimed tax relief because they have not taken specialist advice.
Converting commercial property into a single residential property as a buy to let is an increasingly popular investment option but there is no tax relief on the initial cost of fixtures and fittings.
However, if the conversion is into multiple dwellings and includes significant communal areas such as lifts, plant rooms and entrance halls then it is possible that valuable capital allowances could be used to reduce the tax liability on the rental income.
It is not widely known that anything which can be classed as ‘fixtures’ for tax purposes in communal areas, such as air conditioning, mains wiring, lighting, fire safety systems etc, can actually qualify for tax relief.
If an investor purchases and retains a building for rental purposes, which is renovated and converted for both commercial and residential uses, it is likely that there is an opportunity to claim this tax relief. The same goes for the construction of a new build block of flats.
I have recently provided one company with expert advice which the business’ accountants failed to spot. We identified more than £100k qualifying spend on communal areas within the project which resulted in a saving of over £40k income tax.
It is really important that property owners seek expert advice to identify exactly how to claim the relevant Capital Allowances and maximise the tax relief available.
Don’t be under the false impression that your accountant will automatically have made the relevant capital allowance claims on your behalf! This is a very specialised area of tax and is not widely understood. Every development will be different in terms of the reliefs available, so it is really important to seek specialist advice.
For more information contact firstname.lastname@example.org
If you are a property developer the way your deals are structured will make a big difference to the tax liabilities, access to finance and cash flow for each...
New IR35 regulations being introduced in April 2020 will have significant impact on construction bosses and contractors. IR35 is tax legislation designed to combat tax avoidance by individuals who supply...
Since April 2016 an additional 3% stamp duty charge has been imposed on buyers purchasing a second home, irrespective of the circumstances. However, buyers purchasing a derelict property could...