14 | Bed & Breakfast News | March - April 2016


A £75,000 tax allowance for your B&B?


by Mark Tighe (right), MD of Catax Solutions, capital allowances specialists


The abiding image of the Great British B&B is of a warm and welcoming home-from- home. With this in mind, the idea of turning one upside down and shaking it vigorously will seem a little odd.


But the image of a B&B held aloft with beds, crockery sets, armchairs, staff and guests all tumbling out is very useful in terms of explaining what capital allowances are.


‘Intrinsic fabrication’


Essentially, everything that wouldn’t fall out of a B&B if you turned it upside down and shook it - what’s referred to as the building’s ‘intrinsic fabrication’ - is what you can claim capital allowances tax relief against.


We’re talking about things such as lighting, heating, air conditioning, water disposal, fire alarm and drainage systems, electricity cabling and other ‘embedded’ features like security installations and ventilation.


All of these can produce a huge tax windfall of thousands, or even tens of thousands of pounds for Bed and Breakfast owners.


In fact, in our experience, nine in 10 B&Bs will be due a tax windfall, with the average amount of unclaimed capital allowances found in B&Bs in the region of £75,000.


Tax windfall in Essex


But it can be a lot more than that. For example, the owners of a B&B in Essex instructed us recently to carry out a capital allowances audit. Having surveyed the property in detail, which they had purchased for just under £950,000, we discovered £172,796 of unclaimed capital allowances in the intrinsic fabrication of the building, mostly within the foul water disposal and drainage systems, communication installations and fixed internal fittings.


This was roughly 18% of the purchase price and has made a massive difference to their business, since the net tax benefit to them (at their higher tax rate) was £69,118 (40% of £172,796). This tax rebate was given in the form of an initial lump sum payment and then ongoing tax relief.


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