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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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What type of expenditure are purchase, refurbishment,

This answer was rated:

What type of expenditure are purchase, refurbishment, refitting and equipment
for a new hotel? How I will treat the income tax and capital
gains tax for each type?

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Customer: replied 4 months ago.
okay thank you

Thank you for your question..

Puchase and refurbishment would be deemed capital (land and buildings) and come into play for CGT purposes .

Refitting and equipment would be deemed part of plant and machinery for capital allowances purposes when calculating adjusted profits for tax purposes.

More information on capital allowances can be found here

https://www.gov.uk/capital-allowances

and here

https://staxuk.com/capital-allowances?gclid=EAIaIQobChMItoi8q9nG4wIVAbDtCh2nkgMSEAAYASAAEgKpjvD_BwE

I hope this is helpful andvanswers your question.

If you have any othervquestions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 4 months ago.
Can you explain me again because I did not understand? Can you use estimates for amounts?

Thank you for your reply.

Purchase of hotel 300,000

Refurbishment 100,000

These costs are in the catergory cost of hotel within tangible fixed assets and you use this figure as cost base when calculating capital gain at the time of eventual sale. CGT implications and no income tax implications.

Refitting and equipment 75,000.

This is capital expenditure and you depreciate these assets in your accounts over useful life. Depreciation is disallowed for tax purposes and you claim capital allowances on this expenditure for income tax purposes.

I hope this is helpful.

Customer: replied 4 months ago.
purchase and refurbishment have only CGT.. and Refitting and equipment have only income tax?

Thank you for your reply.

The answer to both is Yes.

I hope this is helpful and answers your question.

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Customer: replied 4 months ago.
purchase and refurbishment are capital allowance.. and refitting and equipment are capital allowance?
Customer: replied 4 months ago.
purchase and refurbishment are capital expenditure.. and refitting and equipment are capital allowance?

Thank you for your reply.

Both categories are capital expenditure

- purchase and refurbishment fall under land and buildings

- refitting and equipment fall under plant and machinery

for capital allowance purposes.

Many thanks