When assessing the tax position of a hospitality property, it is easy to focus on the building and overlook what is inside it. Hotels, B&Bs and holiday parks can contain substantial amounts of plant and machinery, from electrical and heating systems to kitchen equipment and specialist installations. In this blog, we will ask: Which Property Type Generates the Largest Capital Allowance Claim?
For owners and investors, Hotels and B&Bs Capital Allowances and Holiday Parks Capital Allowances can therefore be worth investigating. But which type of property is likely to produce the largest claim?
There is no simple answer. The size of the property matters, but so do the facilities, refurbishment work and amount of qualifying expenditure involved. Two properties in the same sector can produce very different results.
Why hospitality properties can generate significant capital allowance claims
Hospitality businesses tend to have a lot going on behind the scenes. A hotel, B&B or holiday park needs reliable heating, lighting, water, electrical and safety systems, while larger properties may also have commercial kitchens, lifts, air conditioning and leisure facilities.
Some of the plant and machinery associated with these systems may qualify for capital allowances. Depending on the property, this could include:
- Electrical systems and lighting
- Heating and air conditioning
- Plumbing and hot water systems
- Fire and security systems
- Lifts
- Certain sanitary installations
- Commercial kitchen equipment
- Specialist installations
Not every item will qualify, and the rules can depend on the nature of the asset and how the expenditure was incurred. A detailed review is therefore important before deciding what can be included in a claim.
Hotels and B&Bs Capital Allowances
Hotels can contain a wide range of qualifying fixtures because of the facilities needed to run them. A larger hotel might have bedrooms, restaurants, kitchens, conference spaces, reception areas, lifts, plant rooms and leisure facilities, each with its own installations and equipment.
A refurbishment could involve substantial spending on electrical systems, heating and ventilation, fire protection, security and other fixtures. Some of this expenditure may qualify for capital allowances, making a review worthwhile when significant work has been carried out.
B&Bs tend to be smaller, so the potential claim is often lower. That does not mean they should be overlooked. A smaller property that has undergone a major refurbishment can still contain a meaningful amount of qualifying expenditure.
Holiday Parks Capital Allowances
Holiday parks can be more complicated to assess because a single site may contain a mixture of accommodation and commercial facilities.
As well as static caravans, lodges or chalets, a park might have reception buildings, restaurants, entertainment venues, swimming pools, shops and maintenance facilities. There may also be substantial site-wide infrastructure supporting these areas.
That can mean significant expenditure on electrical systems, heating, water, security, fire protection and specialist leisure facilities. When assessing Holiday Parks Capital Allowances, it is therefore important to look at the site as a whole rather than concentrating solely on the accommodation.
Which property type generates the largest claim?
There is no standard answer because the property type alone does not determine the value of a capital allowances claim.
A large hotel may have substantial qualifying expenditure across its bedrooms, kitchens, plant rooms and leisure facilities. A holiday park could have even more expenditure spread across multiple buildings and site facilities. Meanwhile, a smaller B&B may have a more modest claim, but could still present a worthwhile opportunity if it has recently undergone extensive refurbishment.
When assessing a property, the main factors to consider include:
Property size: Larger properties will often have more plant, machinery and fixed installations to assess.
Construction or refurbishment costs: Significant expenditure can create more opportunities to identify qualifying assets.
Facilities: Commercial kitchens, restaurants, leisure facilities and other specialist areas can add considerable amounts of plant and machinery.
Age and history: An older property can still contain valuable qualifying assets, particularly if it has been upgraded or refurbished over the years.
Previous claims: Previous owners or advisers may not have identified every qualifying asset, leaving potential opportunities for further investigation.
In other words, two properties costing the same amount can have very different capital allowance outcomes. The detail behind the expenditure matters.
An illustrative example
Consider two investors who each spend £1 million improving their property. One owns a hotel, while the other operates a holiday park.
It would be easy to assume that the capital allowance opportunity should be broadly the same because both have spent the same amount. That is not necessarily the case.
The hotel refurbishment might include substantial work to electrical systems, heating, ventilation, security and commercial kitchen areas. At the holiday park, the expenditure could be spread across accommodation, communal buildings, water systems, leisure facilities and other site infrastructure.
The amount spent is therefore only part of the story. What the money was actually spent on is what matters when identifying qualifying expenditure.
This example is illustrative only and is not an indication of the amount either property would qualify for.
Why specialist advice can make a difference
Capital allowances can become particularly complicated when property transactions involve fixtures and significant refurbishment expenditure.
An accountant may handle the wider tax position, but identifying qualifying fixtures can involve detailed knowledge of the property itself. This is where specialist surveying and capital allowances expertise can be useful.
A specialist review can look at the property, expenditure and supporting records to identify qualifying assets and establish an appropriate valuation.
This can be particularly relevant when buying a hotel or holiday park, carrying out a major refurbishment, or reviewing a property where capital allowances have never been properly assessed.
Make sure your hospitality property is not underclaiming
Hotels, B&Bs and holiday parks can all contain valuable qualifying assets, but there is no standard percentage or typical claim that applies across the sector.
The size of the property is only one consideration. The facilities it contains, the work carried out and the history of previous expenditure can all affect the potential value of a claim.
If you own or are considering investing in a hotel, B&B or holiday park, a specialist capital allowances review could identify tax relief that has previously been overlooked.
Eureka Capital Allowances helps commercial property owners identify and maximise capital allowance opportunities. Contact the team to discuss your property and find out whether a specialist review could uncover additional tax relief.
