FHL Capital Allowances - Plant and Machinery

Victoria17

OK I think this is a really niche question but I'm hoping one of you might know what I'm talking about...
There are some companies that specialise in surveys that establish how much the ''plant and machinery'' of your FHL is worth (plumbing, parts of the kitchen that qualify etc...) so that you can use that as evidence for HMRC and put it down as First Year Allowance/Capital Allowances on your Tax Return (or Writing Down Allowances if the business has already been operating for a while) and it's meant to save a lot of money in tax relief.
One such company has evaluated that they would be able to come up with an estimated £31K valuation (subject to survey) for the Plants and Machinery of my studio flat, based on the info I gave them, which would be elligible for Capital Allowance claim on my tax return and would save me an estimated 12K of tax.
The company would charge me 2K for the survey. 
This sounds great to me but is there a catch? Because I can't find much info about it anywhere, even amongst experienced FHL owners that I know. No one's heard of that Plant and Machinery Allowance Survey... Surely if it was as good as it sounds everyone would be talking about it and doing it? What's the catch? Am I missing something?
Or is it a great way to save tax money and I should just go for it? 

[Deleted User]

These companies have been around for many years - such as this one :

https://wandsworthconsulting.com/services/

Have they indicated what their approximate fee would be? One such company (not the example above) which I came across were charging 35% plus VAT.

Victoria17

[Deleted User] said:

These companies have been around for many years - such as this one :

https://wandsworthconsulting.com/services/

Have they indicated what their approximate fee would be? One such company (not the example above) which I came across were charging 35% plus VAT.

Yes they would charge me 2K. But I want to know if it's something I should consider or leave it. I don't understand why not everyone is doing it if it's as great as it sounds, I feel like I'm missing something...

Jeremy535897

The annual writing down allowance is likely to be 6% (reducing balance) for some of the items, if no AIA is available, and you have to bring in a market value of the plant and machinery to calculate a balancing charge or allowance if you sell the flat. £31,000 sounds a lot for a studio flat used as a FHL.

[Deleted User]

Victoria17 said:

purdyoaten2 said:

These companies have been around for many years - such as this one :

https://wandsworthconsulting.com/services/

Have they indicated what their approximate fee would be? One such company (not the example above) which I came across were charging 35% plus VAT.

Yes they would charge me 2K. But I want to know if it's something I should consider or leave it. I don't understand why not everyone is doing it if it's as great as it sounds, I feel like I'm missing something...

So - let’s say for example that you can claim all of the plant and machinery as a first year allowance- and £31000 seems like an enormous amount (not withstanding the fact that a large proportion may only attract WDA). This will reduce the value for tax purposes to zero. When you eventually sell the flat the value of the plant and machinery is brought back into play. If worth £15000, for example, your profits would increase by that amount. I am not sure the company will be highlighting this.

Victoria17

Jeremy535897 said:

The annual writing down allowance is likely to be 6% (reducing balance) for some of the items, if no AIA is available, and you have to bring in a market value of the plant and machinery to calculate a balancing charge or allowance if you sell the flat. £31,000 sounds a lot for a studio flat used as a FHL.

I would qualify for First Year Allowance. But are you saying if I switched the property to a Buy to Let or if I sold it, I would have to have another survey/evaluation done, declare it to HMRC and pay taxes on that amount? I don't know after how long it would be considered to be depreciated enough in value that the whole process would be worth it...

[Deleted User]

Victoria17 said:

Jeremy535897 said:

The annual writing down allowance is likely to be 6% (reducing balance) for some of the items, if no AIA is available, and you have to bring in a market value of the plant and machinery to calculate a balancing charge or allowance if you sell the flat. £31,000 sounds a lot for a studio flat used as a FHL.

I would qualify for First Year Allowance. But are you saying if I switched the property to a Buy to Let or if I sold it, I would have to have another survey/evaluation done, declare it to HMRC and pay taxes on that amount? I don't know after how long it would be considered to be depreciated enough in value that the whole process would be worth it...

I think that our posts crossed - you are correct.

Jeremy535897

Yes, and of course a FHL can fail to meet the qualifying tests.

Victoria17

[Deleted User] said:

Victoria17 said:

Jeremy535897 said:

The annual writing down allowance is likely to be 6% (reducing balance) for some of the items, if no AIA is available, and you have to bring in a market value of the plant and machinery to calculate a balancing charge or allowance if you sell the flat. £31,000 sounds a lot for a studio flat used as a FHL.

I would qualify for First Year Allowance. But are you saying if I switched the property to a Buy to Let or if I sold it, I would have to have another survey/evaluation done, declare it to HMRC and pay taxes on that amount? I don't know after how long it would be considered to be depreciated enough in value that the whole process would be worth it...

I think that our posts crossed - you are correct.

Thank you for confirming this. So there it is, there's the catch! I'll just be delaying some tax payment but not avoiding it forever. And it will cost me 2K for the privilege. Not worth it... :-( Thanks again!

Victoria17

Jeremy535897 said:

Yes, and of course a FHL can fail to meet the qualifying tests.

I've studied all the criteria and I will qualify without difficulty but yes, I see your point. If it failed then I would have paid 2K for nothing because I wouldn't be allowed to claim Capital Allowances or Writing Down Allowances.
Thank you very much for your help.

[Deleted User]

Victoria17 said:

[Deleted User] said:

Victoria17 said:

Jeremy535897 said:

The annual writing down allowance is likely to be 6% (reducing balance) for some of the items, if no AIA is available, and you have to bring in a market value of the plant and machinery to calculate a balancing charge or allowance if you sell the flat. £31,000 sounds a lot for a studio flat used as a FHL.

I would qualify for First Year Allowance. But are you saying if I switched the property to a Buy to Let or if I sold it, I would have to have another survey/evaluation done, declare it to HMRC and pay taxes on that amount? I don't know after how long it would be considered to be depreciated enough in value that the whole process would be worth it...

I think that our posts crossed - you are correct.

Thank you for confirming this. So there it is, there's the catch! I'll just be delaying some tax payment but not avoiding it forever. And it will cost me 2K for the privilege. Not worth it... :-( Thanks again!

Yes - but, if it qualifies, and using my figures, you will have claimed tax relief on the correct depreciation (£31000 - £15000). The point could be that you don’t have to pay any existing accountant £2000 for the privilege.