“Capital Allowances and other
fiscal incentives look likely to
continue to play a key role in the
Government’s plans for growth... ”
A summary of the main points affecting Capital Allowances tax relief within the Budget.
The items which qualify as assets for HMO, Multi-lets, Commercial and existing FHL properties have not changed and tax relief can still be claimed on your property.
HMO and Multi-let Properties
HMO owners can still claim between 7% and 20% of the purchase price of the property in allowances, depending on purchase date. The tax relief is available against any taxable income.
Commercial property owners can still claim between 15% and 50% of the purchase price of the property in allowances, depending on the purchase date and type of commercial use. The tax relief is available against any taxable income of the owner.
Writing Down Allowances
It was confirmed that the overall rate of Writing Down Allowances will reduce from April 2012, as shown below:
- Main Pool of allowances down from 20% to 18%
- Integral Features down from 10% to 8%
Annual Investment Allowances
It was also confirmed that the AIA limit will reduce from £100,000 as it is currently, to £25,000 from April 2012.
Furnished Holiday Lets
From April 2011, new tax rules for FHL’s have restricted the loss relief to within the same FHL business. This means that the ability to use FHL losses against other income streams has been withdrawn, losses identified from April 2011 onwards, can only be used against that property business.
For the open tax years, 2009/10 and 2010/11 you can still claim the loss relief against any other income that is subject to UK tax. From the 2011/12 tax year onwards, this will cease.
Tax relief is still available from April 2011; Capital Allowances may be claimed against the profits of your FHL business.
Letting and availability thresholds will increase from April 2012.
The chancellor also announced that 21 new enterprise zones have been identified to encourage growth and investment within these potentially deprived areas. Enhanced Capital Allowances for property investments are able to be claimed within these zones. The first 10 zones will be in the urban areas of highest need. A further 11 zones are to follow, including 1 in London.
Land Remediation Relief
To be abolished (date to be confirmed by HMRC) – This tax relief at 150%, applicable to companies remediating contamination, has been scrapped. Contact us for any work undertaken regarding remediation prior to April 2011.
Combining PAYE & NIC
The government will consult on the merging of these two taxes and announce over the coming years, this could potentially mean that more tax relief is available for property owners if the combined levy is a result of gross income.
- The main rate of corporation tax has been reduced from 28% to 26% from April 2011. The rate will then reduce by 1% each year to reach 23% by 2014.
- The small profits rate of corporation tax to fall from 21% to 20% from 1st April 2011.
- Confirmation that income tax rates for 2011/12 will remain at 2010/11 levels, this means that the 50% top rate still applies for an uncertain period despite being labeled temporary.
Flat Conversion Allowances
To be abolished (date to be confirmed by HMRC) – This relief gives 100% Capital Allowances for expenditure incurred in converting empty or under-used space over shops and commercial premises for residential use, subject to certain conditions being met.
The chancellor announced that although 3 forms of Land Tax Evasion are being scrapped, it confirms that Capital Allowances being a legitimate tax avoidance mechanism as set out by the treasury are a genuine way of reducing your tax bill.
Capital Allowances can still be claimed on UK Properties. The rate of allowances which can be claimed per year, unless in the year of purchase, will reduce from April 2012.
The biggest impact is on those who own Furnished Holiday Letting properties who cannot now use the losses against general income. The qualifying rules will also change from April 2012.