Are capital allowances available on premises?

summereire

Hi, we're renting a premises at the moment so get to claim that amount - just wondering if we buy a premises what exactly can we claim?

I understand the mortgage payment itself can't be claimed, but can some of the interest? What % and for how long?

And are there capital allowances, or any other relief, available on the overall cost of the building (i.e. mortgage amount)?

Buying would be a good deal for us with property prices the way we are, but not if our taxes go way up cause we can't deduct.

Thank you for any ideas or insight on this.

Peppa

Assuming you mean buy to live in - there is nothing to claim.

summereire

No we want to buy it for office type use, connected with our business.

I know if I buy equipment for the business that I can claim capital expenditure on that, with the depreciation over a number of years.

At the moment we are claiming the rent we pay for our current smaller premises.

I'd like to buy, but am afraid that while the cost of the mortgage may be affordable not being able to claim the mortgage payment like I can rent may be an issue so wondering what are the factors here.

How much of the mortgage can we claim?

Is there capital expenditure allowances on buildings?

Thank you!

Peppa

Assuming your business will pay rental income to you.

You will then personally/parntership(Form Firm 1 annually) be in receipt of rental income. A Form 11 will need to be submitted annually (assuming prior to this you only had PAYE income but if you are self employed you would be submitting F11 anyhow). Rental income is subject to levies etc when submitting Form 11.

You can offset 100% interest and any expenses related to maintain the building in a fit state to reduce your rental profit.

Capital allowances can be claimed on additions to FF&E but the business may purchase these and in turn it claims CA.

Rem to keep all receipts related to cost of purchase i.e. solicitors fees etc as if (when) you sell you will be liable to CGT and will need all these.

Really you need to sit down with your accountant and to do the figures to see if it is worthwhile.

Victor

If "you" are a company, you buy the premises and can write off (a) 100%(?) of the mortgage interest in the year it is incurred (unless there is an accumulated loss) (b) the capital cost (possibly including ancilliary costs) over 20(?) years and (c) maintenance, insurance, etc. costs. The 20 years may have been extended in recent years.

So, if you buy a premises for €200,000 with a 8% interest rate, in the first year you could write off approximately (€200,000x8%+€200,000/20) =(€16,000+€10,000) = €26,000 + maintenance, insurance, etc. costs. That exact calculation needs to be worked out properly. Cashflow would need careful management.

It would be useful to talk to an accountant or solicitor familiar with such arrangements.

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Peppa wrote: »

Assuming your business will pay rental income to you.

While this is sometimes done, I think the OP is looking for something more straightforward.

The arrangement that Peppa is referring to is where, typically, the directors of a company buy a premises and rent it to the business. On the books, the rent will come across as an expense and the lanrdlord (directors) will see it as an oncome, which is offset against their expenses (mortgage, etc.). If the business goes bust, the directors still have the premises. To stop directors doing this, many banks seek personal guarantees from the directors / shareholders on any business loans. This may be useful in reducing corporation tax, but needs to be done properly.

Groups of companies may do something similar where ABC Group Ltd. owns ABC Manufacturing Ltd. and ABC Property Ltd. ABC Property Ltd. owns the building, but ABC Manufacturing Ltd. uses it - rent may or may not change hands.

summereire

Thanks very much for all of that guidance - very much appreciated.

So on the first point that just leaves two questions:

1) What percentage of the interest can be claimed?
2) Is it 20 years, and at what rate each year, that capital expenditure can be claimed? I've been looking for details on this but haven't found any yet.

As for the second arrangement of renting off owner, I see what you mean. Presumably this could only be done if it's a company and not a sole trader as then they are separate entities?

And yes, I will seek formal advice before doing anything, I just like to do my research first so I know what the options are.