I’m the director of a limited company and am thinking of buying a bed and breakfast establishment in Weymouth. It requires a lot of updating. I’d like to put air conditioning in all the guests’ bedrooms as well as in the communal areas. I’d like to replace the boiler system, so there is a plentiful supply of hot water. My questions are, would all this expenditure qualify for capital allowances, and does it matter at what point in the year I make the improvements to qualify for capital allowances? My year end is March. 

Arthur Weller replies:  

HMRC’s Capital Allowances Manual states (at CA23060): 'Expenditure incurred on the provision of plant or machinery ‘for use in’ a dwelling-house is not qualifying expenditure for a UK property business'. At CA11520, HMRC states: 'A hotel (run as a trade and offering services, whether by an owner-occupier or by a tenant) is not a dwelling-house.’ Your expenditure on air conditioning and a new boiler system would appear to fall under the 'integral features' category of plant and machinery (CA22300). As for the timing, if you fully purchase the asset, it belongs to the company, and if you install it or bring it into use before 31 March, then you can claim the capital allowance expense in this accounting period.