I own a number of rental properties; a mixture of self-contained flats and houses. I’ve received an email from a property expert that says I can claim capital allowances as a percentage of the cost of these properties, which will produce a guaranteed tax refund for me. Is that true?
No, this is not true. Capital allowances cannot be claimed for equipment or fittings used within residential properties, which the Tax Office refer to as ‘dwelling-houses’. There is an exception for properties that qualify as furnished holiday lettings, when each letting must generally be for short periods of less than 30 days. If you make a capital allowance claim for your rental properties it may be passed by the Tax Office, under their ‘process now, check later’ system. But when the Tax Inspector checks your claim it will be refused, any tax refunded will have to be repaid with interest, and penalties will be charged. This can happen up to 20 years after you submitted the incorrect claim!