Even in these economically tough times leisure, hospitality and travel businesses will either be looking to upgrade or at least maintain the quality of their assets. Against this background it is vital to maximise your claims for tax allowances and, with careful planning, you can minimise your tax payments and even generate some repayments.
At Kingston Smith we find that the best answers for clients arise when they involve us in the process before the project has started. For example, close involvement with surveyors can result in the likely costs of the project being correctly analysed so as to enable appropriate claims for the expenditure to be made. At its simplest, the distinction between a repair and an improvement will have a significant impact on the tax treatment.
Notwithstanding reductions to the rate of general pool capital allowances, the following is a summary of the allowances available:
- Enhanced capital allowances - 100%
- First year allowances – 40% on expenditure incurred prior to April 2010
- General pool - 20%
- Integral features – 10%
In addition, if your project involves the remediation of land that was contaminated by a previous user then the costs are eligible for an attractive tax allowance, at 150% of cost, designed to encourage the use of brownfield sites.
Enhanced capital allowances are targeted at the use of plant and machinery that is either energy efficient or conserves water. You may therefore wish to maximise your green credentials and opt to install types of plant that appear on the relevant list to qualify for this relief. If these allowances create a loss for tax purposes they can be surrendered at a discounted rate for a tax repayment.
Integral features are a new category of allowance that gives relief for expenditure such as exterior solar shading, lifts and other expenditure that may not have been eligible for relief under the previous regime.
In summary, careful planning will maximise your claims for tax relief and help to husband your cash at a time when cash is most definitely king!
Contacts
Brian Pope is a partner at Kingston Smith LLP, one of the UK’s top 20 accountancy firms, and can be contacted for further advice on: 01708 759759 or bpope@kingstonsmith.co.uk. Brian and the team specialise in providing business and financial advice to the hospitality sector.
