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Private rental sector and capital allowances – What you need to know

If 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. If, however, 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.

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 qualify for tax relief in this regard.

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 this tax relief.

James Greenhalgh, Tax Director, has recently provided expert advice which the business’s accountants failed to spot. James identified over £100k qualifying spend on communal areas within the project resulting in a saving of over £40k income tax.

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

Don’t be under the false impression that your accountant will automatically have made the relevant capital allowance claims on your behalf because this is a specialised area of tax and is not widely understood and every development will be different in terms of the reliefs available.


The information was correct at time of publishing but may now be out of date.

Posted by James Greenhalgh
26th April, 2019
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