Maximising new development entitlement with £1.8m allowances on a £5m project

Development of Budget Hotel

A private investor client developed a budget hotel in 2008 for approximately £5million and was seeking to maximise the capital allowances entitlement.

Having analysed all relevant cost information obtained from the client and the quantity surveyors, including the detailed final account, supporting invoices and capital expenditure ledgers, we carried out a property inspection, and were able to identify relevant qualifying expenditure to determine the level of capital allowances and allocate it to the appropriate financial periods.

The total level of Plant and Machinery qualifying for capital allowances amounted to in excess of £1.8million, comprising Main Pool Plant and Machinery, Special Rate Integral Features and Energy Saving Plant and Machinery qualifying for Enhanced Capital Allowances, and resulted in a tax saving in the first year of approximately £80,000.

A large proportion of the residue of the development expenditure, being some £2.5million also qualified for Industrial Buildings Allowances, which resulted in an additional first year tax saving of £21,500.  However due to their phased abolition, with effect from April 2011, Industrial Buildings Allowances will no longer be available.