How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
Type Your Tax Question Here... is online now

Background: Last year I started up a small glamping cabin

Resolved Question:

Last year I started up a small glamping cabin business
This is year one of the business.
7,000 Income
6,500 Expenditure
Expenditure equals Build costs and Running costs.
I understand that the venture is deemed to be a micro business so must I include a proportion of the expenditure as a capital cost (8-18%) or can all the expenditure be claimed in year one on a cash only basis?
If some of the expenditure has to be treated as capital, how can I claim the remainder of the expenditure in year one?
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.
Thank you for your question..Please clarify for me..Do you sell these cabins when built or do you hire them? Many thanks
Customer: replied 1 year ago.
Oh yes, sorry...I hire it out as a holiday rental!
Expert: replied 1 year ago.
Thank you for your reply.Apologies for the delay in my response.You use glamping cabins to earn an income. These cabins are your tangible fixed assets and therefore the cost of building them is capital cost.The running expenses/cost would be revenue expenditure and you offset this expenditure against rental income as normal.The cabin would fall under the category of plant and machinery for capital allowances purposes and you can claim annual investment allowance of 100% in the year of expenditure.I hope this is helpful and answers your question.
Customer: replied 1 year ago.
Can you please clarify what you mean by - 'capital allowances purposes and you can claim annual investment allowance of 100% in the year of expenditure.'
My understanding is that if I have to go down the capital route as you say then I can only claim on some parts of the build ie white units, sinks, showers, fire alarms at 8-18% and not the main fabric of the building which leaves me asking how I process figures for purchases such as stud walls, external cladding, roofing, plasterboard etc
OR if it comes under 100% annual investment allowance as you say, does this mean that all expenditure can be offset against revenue for the year?
Expert: replied 1 year ago.
Thank you for your reply.
I will revert to you tomorrow.
Many thanks.
Expert: replied 1 year ago.
Thank you for your reply...It would appear you could categorise a fair bit of the expenditure as plant under Sec 23 including moveable partition walls and claim AIA at 100%.The fabric of the building would not qualify for capital allowances and will be a cost taken into account when calculating gain/loss on eventual sale of it.More information on what qualifies as plant and machinery can be found here here I hope this is helpful.
Customer: replied 1 year ago.
Hi, Ok so This cabin will not be sold.
But the question I have to capitalise OR can I offset all of the expenditure against year one takings? (as for example annual investment allowance.)
Expert: replied 1 year ago.
Thank you for your reply..As the cabin will not be sold, it becomes a tangible fixed asset in the company's/entity's accounts.. it will be capitalised.You claim capital allowances against capital expenditure including claiming annual investment allowance of 100% if applicable in the year of expenditure.In your case, not all expenditure is deemed plant and machinery and although you can claim AIA of 100% but only on that part of expenditure that is categorised as palnt and machinery in broad sense.The fabric of the cabin would not be deemed plant and machinery and you can't claim capital allowance on it. This cost would be offset against the sales value or scrap value at the end of its useful life.I hope this is helpful. and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Ok, thank you for your time!
Expert: replied 1 year ago.
I thank you for accepting my answer.
Best wishes.

Related Tax Questions