How to unlock tax savings in purpose-built student accommodation and build-to-rent sectors

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For property owners and investors involved in the thriving purpose-built student accommodation (PBSA) or build-to-rent (BTR) sectors, capital allowances represent a valuable but often overlooked opportunity for significant tax savings. We provide an overview of why and how to make a claim.

What are capital allowances?

Capital allowances are a form of tax relief provided by the Government to encourage investment in commercial properties. They allow you to deduct certain costs associated with the acquisition, construction, or renovation of buildings from your taxable profits. This means you pay less in taxes and retain more of your hard-earned income.

Capital allowances in PBSA and BTR

In the PBSA and BTR sectors, you can claim capital allowances on various elements of your properties, including:

  • Plant and machinery: This category covers a wide range of assets, for example, equipment in gyms, bars, and co-working rooms. Full expensing should be available for this type of capital allowance meaning that 100% of the cost can be written off against tax in the year of expenditure.
  • Integral features: These are essential components of a building’s structure, such as electrical and plumbing systems. Claiming allowances on these can result in substantial tax savings. 50% of the total costs may be available to claim against your tax bill in the year of expenditure.
  • Structures and buildings allowances: This allowance may be available depending on the scheme.
  • Common areas: It’s important to note that capital allowances can only be claimed for assets located in communal areas. These are spaces used by all residents, such as hallways, common rooms, and shared facilities. Therefore, a detailed survey may be required to allocate the various items of qualifying equipment.

Why should you claim capital allowances?

  • Reduced tax liability: Claiming capital allowances can significantly reduce your tax liability, leading to improved cash flow and greater profitability.
  • Competitive advantage: By minimising your tax burden, you can offer more competitive rental rates to your tenants, making your PBSA or BTR properties more appealing in the market.
  • Enhanced return on investment: Capital allowances can enhance the return on your property investment.
  • Maximise savings: To maximise your savings, it’s crucial to work with specialists in capital allowances. We conduct detailed surveys and identify all eligible assets within your PBSA or BTR properties, ensuring that nothing is missed.

What is the process to claim capital allowances?

Claiming capital allowances in the PBSA and BTR sectors involves a straightforward process:

  1. Assessment: Engage a capital allowances specialist to evaluate your property and identify eligible assets.
  2. Documentation: Ensure that all necessary documentation is in order, including the submission of a capital allowances report to HMRC. We work effectively with existing advisors such as accountants to make the process as straightforward as possible.
  3. Tax relief: Enjoy the benefits of reduced tax liabilities and improved cash flow.

Got a question? Get in touch.