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HMRC internal manual

Capital Allowances Manual

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IBA: Qualifying hotels: Period for which qualifying hotel conditions must be satisfied

When you decide whether a hotel is a qualifying hotel check whether it satisfied the conditions for being a qualifying hotel during the period of 12 months that ends on the last day of the chargeable period for which the allowance is claimed.

In deciding whether the hotel is open for at least 4 months in the season in the 12 months ending when the chargeable period ends you may have to look at the season in 2 parts. For example, if in the example above Jim has an accounting date of 30 June you look at the months July, August, September 2001 and April, May and June 2002 in deciding whether the Morristown hotel is a qualifying hotel in the year ended 30 June 2002.

If the hotel was brought into use less than 12 months before the end of the chargeable period for which the allowance is claimed you should look at the period of 12 months that begins when the hotel is brought into use.

For example, suppose that Jim brings the Morristown hotel into use on 1 January 2002. You should look at the 12 months ended 31 December 2002 in deciding whether the hotel is a qualifying hotel in the year ended 30 June 2002.

A hotel may fail to be a qualifying hotel because it has fewer than 10 letting bedrooms. If it builds an extension so that it has 10 letting bedrooms look at the 12 months beginning with the time that the extension is brought into use in deciding whether it is a qualifying hotel.

For example, the Morristown hotel is not a qualifying hotel when it is constructed but Jim builds an extension that brings it up to the required number of bedrooms. The extension is brought into use on 1 April 2002. Jim’s accounts are drawn up for the year ended 30 June 2002. Look at the 12 months ended 31 March 2003 to decide whether the hotel is a qualifying hotel for the year ended 30 June 2002.

Once a hotel has satisfied the conditions for being a qualifying hotel for a chargeable period it continues to be a qualifying hotel until the end of that chargeable period unless it ceases altogether to be used. It does not matter if the use changes before the end of the chargeable period provided that the building is still used for something or is temporarily disused. It stops being a qualifying hotel as soon as it ceases altogether to be used.

There is a balancing adjustment if:

  • there is a balancing event within CAA01/S315 CA35050, or
  • a building ceases to be a qualifying hotel and there is then a period of 2 years when the building is not a qualifying hotel but there is not a balancing event in those 2 years CA35000.

 

Example

The Cornwall Hotel is a qualifying hotel. Its accounting date is 31 March. On 1 January 2002 it is converted into a student hostel. This means that it ceases to satisfy the conditions for being a qualifying hotel on 1 January 2002. However, it has satisfied the conditions for being a qualifying hotel during the year ended 31 March 2002 because it was a hotel during the season. This means that it is a qualifying hotel for the year ended 31 March 2002. If there is no balancing event before 1 January 2004 there is a balancing adjustment on that date.

If a qualifying hotel becomes temporarily disused the normal rules about temporary disuse do not apply CA32800. It is treated as a qualifying hotel for 2 years after the end of the chargeable period in which the temporary disuse begins. It is then no longer treated as a qualifying hotel and so there is a balancing adjustment if another 2 years go by without it becoming one again.

The excepted use legislation CA32310 does not apply to qualifying hotels. This means that a shop inside a hotel will qualify for IBA provided that it is part of the amenities of the hotel.