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Capital allowances and the private rental sector

Where an investor converts commercial property into a single residential property as a buy to let then they are not entitled to tax relief on the initial cost of fixtures and fittings. However, if the conversion is into multiple dwellings with significant communal areas such as lifts, plant rooms and entrance halls then it is possible that investors could be missing out on valuable capital allowances that could be used to reduce tax on rental income.


What is classed as ‘fixtures’?

It is not widely known that anything which can be classed as ‘fixtures’ for tax purposes in communal areas can qualify for tax relief. Such items might include air conditioning, mains wiring, lighting, fire safety systems etc..


Don’t miss out on valuable tax relief

If you purchase a building which you renovate and convert to mixed commercial and residential use or construct a new build block of flats and then retain the property for rental purposes, it is likely that there is an opportunity to claim tax relief.

James Greenhalgh, Tax Director, is an expert in this area. On one project he identified over £100k qualifying spend on communal areas which the business’s then accountants had failed to spot. This resulted in a tax saving of over £40k.


Every project is different – get in touch and let us take a look

There are potentially significant numbers of property owners sitting on unclaimed tax relief related to properties of this type and ss a property owner, it is important to identify how to claim the relevant Capital Allowances available to you.

Another important consideration is of course VAT if you are converting commercial property to residential and it’s also important to get the VAT treatment correct to mitigate VAT charges associated with the project.

Get in touch with our expert team to ensure you are maximising your tax relief and structuring your project in the most tax-efficient way. Don’t assume that your accountant will automatically have made the relevant capital allowance claims on your behalf or understands the complexities of the VAT.

Property is a specialist area where tax and VAT is concerned and often and is not properly understood. Every development will be different in terms of the reliefs available.

Capital allowances

The information was correct at time of publishing but may now be out of date.

Posted by James Greenhalgh
22nd February, 2023
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