Business tax reliefs for the hotels and leisure sector

Businesses within the hotels and leisure sectors face an ever-increasing burden in terms of tax compliance. In times when both the government and HM Revenue and Customs (HMRC) are closing perceived tax loopholes and putting pressure on businesses to pay the ‘right amount of tax’, businesses will fall behind if they fail to keep up with this increased burden.

In what is an extremely competitive sector, businesses simply cannot afford to miss out on the significant number of tax reliefs available to them. Two such tax reliefs that are pertinent to the hotels and leisure sectors are capital allowances and research and development (R&D) tax relief.

Capital allowances

For tax purposes, capital expenditure is not usually deductible within the year in which it is incurred, whilst depreciation is also disallowable. Instead, businesses are able to obtain relief on qualifying assets in the form of capital allowances – the tax equivalent of depreciation.

Hotels and leisure businesses are often abundant with capital assets that qualify for capital allowances, such as furniture, catering and cleaning equipment, along with electrical and lighting systems. In addition, hotels that have spa facilities may also claim on items such as swimming pools, sauna and steam rooms, massage tables, mirrors and murals and other items that contribute to general ambience.

It is vital that specialists are involved as early as possible to identify qualifying items, claim for missed opportunities and assist in maximising allowances on current expenditure. It may also be possible to review historical expenditure and make a full increased capital allowances claim in a current year tax return. If capital allowance claims are properly made, then considerable tax savings can be gained.

R&D tax relief

R&D tax relief is designed to reduce corporation tax liabilities for profit making companies, or where they are loss making, to convert tax losses into valuable tax credits.

Often companies are not aware that R&D tax relief is available to them, or worse, believe it is simply not applicable to the hotels and leisure sectors. This is best illustrated by a statistic from HMRC that reports that only 1% of all R&D claims submitted during 2014 were made by accommodation and food businesses.

The government has struggled with the perception that R&D tax relief only applies to businesses within the science, pharmaceutical or manufacturing sectors, but there are plenty of opportunities for all businesses to submit an R&D claim if they are able to identify eligible activities.

As a guide, activities eligible for R&D relief could include, but are not limited to:

  • developing software for internal use, e.g. booking systems;
  • integrating different software systems to enable them to work together;
  • developing websites and complex apps;
  • improving sustainability/meeting new euro codes or legislation;
  • using new or existing materials in a novel way;
  • carrying out any work on listed buildings;
  • developing processes or designs to accommodate health and safety concerns.

It is also possible to submit replacement R&D claims where the original claim is believed to be understated.

For further information on the support we are able to provide to hotel and leisure businesses, please contact our dedicated team on hotels@moorestephens.com.

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