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Private Landlords Missing Out On £10,000 Capital Allowances

Private landlords could be missing out on as much as £10,000 in unclaimed capital allowances according to one tax expert. Bell Strategies have calculated that around 90% of landlords are unaware of their right to reclaim part of the tax paid on current and previous buy-to-let property purchases under the Capital Allowances scheme.

The oversight means that 9 out of 10 buy to let landlords feel undue financial strain when purchasing and subsequently renting a private property. Capital Allowances can usually be claimed for 8 – 10% of the purchase price with the amount due then paid immediately by HMRC in the form of a rebate. These funds provide a financial safety net for landlords immediately after taking possession of a new investment property.

Bell Strategies explain that, “Capital Allowances enable landlords to claim for significant items, such as heating and cooling systems, emergency lighting, and security systems. These items are often treated as part of the building costs, but with the correct approach they may all be subject to tax relief.”  

Capital Allowances are available across a number of categories of asset including plant and machinery, business premises renovation and industrial buildings. Significantly, monies spent on or after 11 May 2011 to convert space above residential buildings (i.e. shops) into residential property (i.e. flats or apartments) comes under a 100% Capital Allowances threshold provided certain conditions are met. These include a limit on the amount of rent charged to the tenant and the period of the lease offered.

The ‘Flat Conversion Allowance’ for Flats Over Shops (FOTS) is only available until April 2013 but means the property landlord can claim a rebate for conversion costs, renovation costs, associated repair costs and the costs of providing access.

Capital Allowances must be claimed via an Income Tax Return, making it advisable to enlist the services of a tax professional before submitting any request to HMRC.

Rebecca Peach, managing director of online letting agency I Am The Agent, which provides help and advice for private landlords along with fixed fee packages to advertise a property online says, “Private landlords and buy to let investors are strongly encouraged to sit down with their tax planner and make sure that they are claiming the Capital Allowances available to them in order to really make the most of any investment property in the portfolio. Capital Allowances can offer an excellent way to finance conversions and provide a financial boost for landlords new to investment property. We encourage all of our landlords to check that they aren’t in the 90% missing out on the £10,000 rebate.”

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