+44 (0) 20 7329 1300

Capital Allowances Hidden Gems within Hotels

Introduction

Hotels are abundant in qualifying items of plant and machinery (P&M) and repairs. In the vast majority of cases, the total allowances are not fully identified by either the in house accountants or external advisors.

Why does this happen?

Hotels, in comparison to other commercial properties, have specific trade related plant that are not easily identifiable to a conventional accountant or tax adviser. It requires a specialist to segregate and value these items.

For example many new hotels are built using design and build contracts. In this scenario the costs provided to the client are usually “one liner” high level amounts such as description ‘finishes’. Without specialist surveying and valuation skills, it becomes difficult for an accountant to break down these costs and allocate the correct amount to plant and machinery allowances (PMA) and repairs.

For example finishes may include carpets qualifying as well as tiling which predominantly does not qualify. It may also include some specialist finishes which do qualify such as ambience. It is therefore necessary to engage a specialist who has the expertise to fully segregate costs.

Typical P&M within Commercial Properties

Some examples of qualifying P&M that are found in hotels include lifts, heating and cooling systems, sanitary fittings and hot and cold water installations.

Unusual P&M within Hotels

There are further qualifying items of P&M that are predominantly found within hotels. Significant additional allowances can be obtained. Examples include:

  • Trade drainage
  • Associated costs such as excavation for installation of swimming pools, including finishes such as tiling
  • CAA 2001 s.25 incidental costs such as works to lift shaft within existing buildings
  • Acoustic insulation including thermal insulation where provided
  • Builders work in connection with mechanical and electrical installations
  • Machinery to automatic entrance doors

SetHeight800-Swimming-pool-Kempinski-Shenzhen

Repairs

Where a hotel is refurbished, expenditure on redecoration and roof repairs is often not nicely segregated. A specialist can carefully segregate to exclude improvement expenditure. For a hotel refurbishment there could be 30% or more expenditure that qualify as repairs. It is important for repairs to consider the accounting treatment at an early stage.

Hidden Gems

Along with the above categories, hotels may have qualifying items that create ambience.

There is no defined list that states what ‘ambience’ qualifies as P&M. Many items have become allowable through case law and are trade specific. IRC v Scottish & Newcastle Breweries Ltd (1982) 55 TC 252 was a significant case to consider ambience. The taxpayer was able to claim allowances on decorative assets such as wall plaques, sculptures and tapestries. They were not merely part of the setting but performed a valuable function.

Therefore where ambience is of importance to the trade, such as in hotels and restaurants, the definition of qualifying P&M is wider than an office building. Qualifying items may include:

  • Artwork
  • Decorative assets
  • Specialist finishes

World’s-best-Hotel-Lobby-Designs-5

Hotel Capital Allowances Benchmarks

As shown there is great scope to identify additional allowances in hotels. It is reasonable to expect 20-40% of the purchase price of the hotel to be allocated to PMA, depending on the prior tax history. This will substantially increase if a refurbishment or fit out has been undertaken where 70-90% of total expenditure may qualify for PM and repairs.

Recommended Approach

It is recommended to use a specialist capital allowances firm to extract all the available allowances. Lovell Consulting can identify the hidden gems as well the slightly more unusual items of qualifying plant.

We can also add significant value where information is missing or difficult to obtain. As a dual qualified team in tax and surveying, we are able to break down costs and value qualifying items. This means that it is not necessary to have perfect information.

Back to News

OTHER NEWS

20170719_133055

Lovell Consulting Capital Allowances Student Prize Winner 2017

Lovell Coffee Seminar Sep, Oct and Nov 2017

New Capital Allowances CPD Seminar Dates

Cabot_Square,_Canary_Wharf_-_June_2008

Pension Funds and Capital Allowances Interactions

lexis

Lexis Nexis Webinar – Capital Allowances in 2017

Lovell Coffee Seminar May and June 2017

New Capital Allowances CPD Seminar Date & Speakers Announced

Kaca_film_40%

Capital Allowances and Demountable Partitions; To Move or Not to Move?

1966_Sunliner_caravan_(6262976143)

Employees Claiming Capital Allowances: Caravan Case Demonstrates Hurdles!

Midland_Hotel,_Morecambe,_Lancashire,_England-31Aug2010_(3)

Capital Allowances, Corporation Tax Loss Relief & Interest Deductions – Act Now

British_Houses_of_Parliament

Corporation Tax Loss Relief & Interest Deductions: Capital Allowances

Bar

New 2017 Capital Allowances CPD Seminar Dates Announced

1872042_8c5756ec

Capital Allowances, Trustees and Tax Havens

buildings-1245684_960_720

Interview: A Little Capital Allowances Knowledge Can Be Dangerous

3638890517_7161f4c331_z

MBL Seminar Dates Announced (Capital Allowances in Retail, Hospitality & Offices)

new-picture-56

2016 Lovell Consulting Capital Allowances Art Prize Voting Begins

1

Capital Allowances in the Retail Sector

Palm with a plant growng from pile of coins

Free Cash, Tax Savings & Capital Allowances for SMEs Going Green

2276927_4f106630

Student Accommodation & Capital Allowances

blake-h-portrait

Lovell Consulting Capital Allowances Student Prize Winner 2016

pexels-photo

Capital Allowances within Offices

MBL Webinar

MBL Webinar – Capital Allowances for Property Surveyors

2414578731_82c451232d_b

Capital Allowances & Data Centres

taxjournal-logo

Tax Journal Interview: One minute with…John Lovell, Capital Allowances Specialist

Odeon_Barnet,_High_Barnet,_EN5_(4497059063)

Claiming Capital Allowances and / or Repairs

york-united-kingdom-empty-street

Commercial Property Standard Enquiries: Capital Allowances

New Picture (54)

LexisNexis Webinar – Tax for General Practice & Capital Allowances

England1_144

Artful Plant: When Capital Allowances may be Claimed on a Painting

New Picture (44)

LexisNexis Webinar – Commercial Property Law & Capital Allowances

Thumbs_up_bluefilter

New Capital Allowances Team Appointment – Glenn Ramos

New Picture (48)

MBL Webinar for Property Lawyers and Tax Advisers (Capital Allowances)

Gherkin_stitch

Fundamental Changes to Interest Deductions & Impact for Capital Allowances

playground-99509_960_720 - Copy

Capital Allowances within Childcare Facilities & Schools

Royal_Coat_of_Arms_of_the_United_Kingdom_(HM_Government).svg

John Lovell Comments: 2016 Budget – Impact on Capital Allowances: Commercial Property

Thumbs_up_bluefilter

Capital Allowances Team Announcements

MamaMarseille

Better Call Lovell for Capital Allowances

0928aa_ee33b990a61e441d83d6b257a590d366

Lovell Consulting Capital Allowances 2015 Art Prize

Lexis

LexisNexis Capital Allowances Webinar with John Lovell & Ronak Shah

x-default

Plant in Garden Centres: Claiming the Right Kind for Capital Allowances

1280px-Serpentine_Gallery_Pavilion_5_(2732918169)

Can an Accountant Claim the Capital Allowances without Specialist Support ?

New Picture (33)b

John Lovell Capital Allowances talk at Chartered Institute of Taxation Conference

Albert_dock_at_night

Enterprise Zones & Capital Allowances

14228109324_186f38de00_o

Capital Allowances & Landlord Contributions to Tenant Fitting Out Works

wall-of-keys

10 Key Qualities To Look For In A Capital Allowances Advisor

aMaiFZY

Capital Allowances within Private Member Clubs

iStock_000005218304Small

Effective Dealing with HMRC for Capital Allowances

Taxation Feedback Article

Taxation Feedback: Capital Allowances

rooms+cover

Capital Allowances within Restaurants

Poole2-VTerraceC

Capital Allowances within Nursing Homes

Little Book

Little Book of Big Capital Allowances Savings

xglobal-REIT-ETF.jpg.pagespeed.ic.U54haEqpZd

Real Estate Investment Trusts: Get The REIT Advice on Capital Allowances

Siemens-6MW-Wind-Turbine

Wind Turbines and Capital Allowances

cont land

Contaminated Land – The Big Clean Up for Capital Allowances

New Picture (20)

Capital Allowances & Furnished Holiday Lets

tax_1815371c

Helpful Tips for Claiming Capital Allowances in Tax Returns

Tax-question_300_2

Why Do I Need A Capital Allowances Specialist?

seedling

Land Remediation Relief & Capital Allowances Q&A

Inspired Capital Allowances Savings_Page_1

Inspired Capital Allowances Savings

580_Image_homes_new_oldham

Private Rented Sector (PRS) & Capital Allowances: Key Planning Points

london-6

Drafting For Purchase Contracts And CPSE Capital Allowances Responses

The Great Hall, University of Reading

Lovell Consulting Capital Allowances Student Prize Winner 2015

George Osborne Summer Budget 2015

Summer Budget 2015: Property Tax Updates & Impact for Capital Allowances

???????????????????????????????

The Benefits of Claiming Annual Investment Allowances

LN

Lawyers Should Seek Specialist Capital Allowances Advice

Lovell_Consulting_Groups22-1500w

The New Environment For Capital Allowances

Capital Allowances demolition costs

Capital Allowances – Demolition Costs

Capital Allowances - Asbestos Removal

Capital Allowances – Asbestos Removal

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary: Bowerswood House Retirement Home

wooden-judges-gavel-1024x678 (2)

Property Tax Case Summary: Terrace Hill (Berkeley) Ltd: Impact for Capital Allowances

OLYMPUS DIGITAL CAMERA

Business Premises Renovation Allowance (BPRA) Case Summary: Senex Investments

Construction Expenditure image

Capital Allowances Savings for Construction Expenditure

58767673

Recent Capital Allowances Case Study

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary – Rogate Services

crest(300x380)

Lovell Consulting Capital Allowances Student Prize Winner

wooden-judges-gavel-1024x678 (2)

Capital Allowances Case Summary – LLPs and AIA

Kirsty and Mike 2

New Capital Allowances Team Members

See Saw 2-10 (2)

Lovell Consulting Capital Allowances 2014 Art Prize

EGA_030514_301.indd

Recent Lovell Consulting Press Coverage: Capital Allowances

Lovell_Consulting_Groups05

April 2014 Capital Allowances Fixtures Rules

budgetbox_1107228c

The Budget of 19 March 2014 Announced a Number of Capital Allowances Changes

Lovell_Consulting_Groups22-1500w

Capital Allowances Case Update – The Granleys

Holiday Lets 2

Capital Allowances on Furnished Holiday Lets

wetherspoons-woking-01

Capital Allowances Case Update – Wetherspoon

budgetbox_1107228c

The Budget of 23 March 2012 Announced a Number of Capital Allowances Changes