Capital allowances – does the taxman owe you money?
Despite publicity, many care home owners have overpaid their tax by many thousands of pounds, having failed to claim all their tax allowances. The tax allowances in question are “capital allowances” relating to items of plant and machinery in the fabric of the building, which can include heating and lighting, water systems and sanitary ware, and much more. Capital allowances reduce the tax bill by writing off the cost of capital investments buying, building or refurbishing care premises. They effectively convert capital costs to trading expenses in one’s tax return. This reduces taxable profit/income and the tax paid. Importantly, they are a tax adjustment only and have no effect on the profits shown in financial accounts, or on the market value of the property. The larger care home groups will be claiming these allowances as a matter of routine but smaller operators have historically missed out by underclaiming or not claiming at all, not because they are not entitled, nor because the amounts aren’t worthwhi