Acquiring a hotel? Beware of a potential tax pitfall which applies from April 2014

When a hotel is acquired from a previous owner, the acquisition is likely to include fixtures which could qualify for tax relief in the form of capital allowances.

Where 'second hand' fixtures are acquired, capital allowances can only be claimed where:

  • the seller and the buyer have formally elected, within two years of the sale, to allocate an agreed part of the purchase price to the fixtures, or

  • a Tribunal has determined the amount to be allocated to fixtures, on an application made within the same two year period.


There is a new additional requirement which will applies from 6 April 2014 (1 April 2014 for companies), which is that the seller must have allocated their expenditure to a capital allowances pool, or claimed a first year allowance.    This means that, in order to claim capital allowances, a purchaser must ensure that the vendor has “pooled” their expenditure and must obtain sufficient documentation from the seller in order to be able to show that this is the case as part of the acquisition process.  Failure to do so is likely to mean that tax relief that the purchaser would otherwise be entitled to cannot be claimed. 

For further information see our factsheet.


Vincent Wood
Sue Bill

Related links

Business tax
Hotels and leisure