IMH Advisory LLP has provided capital allowances advice to a hotel brand since it started construction in the UK in 2016.
Each new hotel uses a standardised modular construction for the bedrooms and bathrooms. The module incorporates all the sanitary fittings and equipment and associated hot and cold-water pipework; it also includes part of the fire alarm, electrical and heating systems. Our first task was to understand and analyse the construction methodology and costs for the module, to segregate these for the purposes of Plant and Machinery Allowances (PMA).
The remainder of the hotel was constructed using a main contractor, who oversaw the delivery and installation of the modules, alongside specialist sub-contractors. Therefore, our detailed PMA analysis incorporates these costs, as well as direct orders and consultants’ fees, as shown in the example below.
Going forwards, the Structures and Buildings Allowance (SBA), will also apply to expenditure that previously obtained no tax relief. This includes the major structural elements such as external walls, roofing, steel frame, as well as internal walls and doors, stairs and non-decorative finishes.
In the above example, circa £9.5m may qualify for SBA. Expenditure on legal and planning fees, as well as landscaping will continue to be ineligible.
The overall level of PMA for a hotel is typically between 30% and 45% of the total expenditure, depending on the extent and quality of fit-out completed.
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