All services

The financial due diligence and tax you need when buying a care home.

Buying a care home is one of the more complex acquisitions in the UK market: a regulated business, a property with capital-allowances value embedded in the fit-out, a fee mix that looks different once you separate local-authority, self-funder and <a href="https://www.gov.uk/government/news/better-community-care-thanks-to-nursing-funding-boost">NHS-funded nursing care income</a>, and a structure decision (asset vs share, propco/opco) that determines corporation tax, capital allowances eligibility and <a href="https://www.gov.uk/corporation-tax-rates">the rate at which the group hits 25% CT</a>. Brokers and M&A advisers own valuation and deal-sourcing; we own the accountant's slice: due diligence on the real financial position, the capital-allowances value in the building and fit-out, and the structure that minimises tax on acquisition and ongoing operations. We work alongside your broker and solicitor, not instead of them.

Get in touch
£1,000,000
<a href="https://www.gov.uk/capital-allowances/annual-investment-allowance">Annual Investment Allowance</a> gives a 100% first-year deduction on qualifying plant and machinery (hoists, beds, specialist fit-out) up to £1m per year, frequently absorbing the entire year-one plant spend on a care home acquisition
40% FYA
From April 2026, a new <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/29">40% first-year allowance under Finance Act 2026 s.29</a> applies to qualifying new main-pool additions, with the main-rate <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/28">writing-down allowance at 14%</a> on the remaining pool
3% SBA
<a href="https://www.gov.uk/guidance/claiming-capital-allowances-for-structures-and-buildings">Structures and Buildings Allowance</a> gives 3% per year straight-line on qualifying construction: on a £4m new build, that is £120,000 of annual allowances over 33 and one-third years

The challenges clients face.

Buying at a fee mix that looks fine until you separate the income streams

LA-funded residents, self-funders and residents receiving <a href="https://www.gov.uk/government/news/better-community-care-thanks-to-nursing-funding-boost">NHS-funded nursing care (FNC at £267.68 standard / £368.24 higher rate from 1 April 2026)</a> generate materially different income security and margin profiles. A blended average occupancy figure in a sales pack masks this; due diligence must disaggregate the fee mix.

Missing the capital-allowances value embedded in the property and fit-out

The care home building and its specialist fit-out contain capital-allowances value that reduces the effective acquisition cost. Failing to quantify it before agreeing a price means that value either stays with the seller or is never claimed. The sequencing matters: <a href="https://www.gov.uk/capital-allowances/annual-investment-allowance">AIA</a> first, then the <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/29">40% FYA</a> on residual new main-pool additions, then the <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/28">14% WDA</a> on the remaining pool, then <a href="https://www.gov.uk/guidance/claiming-capital-allowances-for-structures-and-buildings">3% SBA</a> on qualifying construction.

Propco/opco structures triggering the associated-company CT trap

A structure where one company owns the property and another operates the care business is common in the sector. <a href="https://www.gov.uk/corporation-tax-rates">Associated-company rules reduce the CT thresholds proportionately</a>, so two associated companies each reach the 25% main rate at £125,000 of profits rather than £250,000. A group structured before understanding this may pay 25% CT sooner than it expected.

Treating VAT exemption as neutral when it is a permanent cost

The acquired operation's <a href="https://www.gov.uk/guidance/welfare-services-and-goods-notice-7012">welfare VAT exemption</a> means input VAT on consumables, equipment, building works and professional fees is irrecoverable from day one. This is a permanent overhead that belongs in the acquisition financial model, not something to discover in the first set of accounts after completion.

How we help.

Run financial due diligence that stress-tests the real fee mix and cost base

We analyse the target's income by stream (LA, self-funder, <a href="https://www.gov.uk/government/news/better-community-care-thanks-to-nursing-funding-boost">FNC</a>), review staffing ratios and occupancy trends, and model the cost base including employer NIC, care-specific payroll risks and the irrecoverable VAT overhead. The result is a financial position you can underwrite, not the blended figure in the sales pack.

Quantify the capital-allowances position so the price reflects the tax value

We establish the capital-allowances pool in the property and fit-out, apply the correct post-April 2026 sequencing (<a href="https://www.gov.uk/capital-allowances/annual-investment-allowance">AIA</a> then <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/29">40% FYA</a> then <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/28">14% WDA</a> then <a href="https://www.gov.uk/guidance/claiming-capital-allowances-for-structures-and-buildings">3% SBA</a>) and present the tax value so it can be factored into the price negotiation and the post-acquisition cash forecast.

Advise on acquisition structure with the CT and BADR consequences modelled

We model asset vs share purchase, propco/opco arrangements and the associated-company <a href="https://www.gov.uk/corporation-tax-rates">CT threshold</a> effects. If you plan to sell eventually, we also consider whether the structure preserves <a href="/services/selling-a-care-home">Business Asset Disposal Relief eligibility</a> from day one.

Common questions

What financial due diligence should I do before buying a care home?
The key areas are: income disaggregated by LA-funded, self-funder and <a href="https://www.gov.uk/government/news/better-community-care-thanks-to-nursing-funding-boost">FNC streams</a>; historical occupancy and the staffing cost as a percentage of fee income; the capital-allowances value in the building and fit-out; the irrecoverable <a href="https://www.gov.uk/guidance/welfare-services-and-goods-notice-7012">VAT overhead</a>; and any CQC compliance history that affects the regulatory risk. A broker will provide a trading pack, but independent financial due diligence goes behind the blended numbers.
What capital allowances can I claim when I buy a care home?
Specialist care equipment, hoists, beds and fit-out items are qualifying plant and machinery. The <a href="https://www.gov.uk/capital-allowances/annual-investment-allowance">Annual Investment Allowance</a> gives a 100% deduction on up to £1m per year. Beyond AIA, a <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/29">new 40% first-year allowance (FA 2026 s.29)</a> applies to qualifying new main-pool additions, with <a href="https://www.legislation.gov.uk/ukpga/2026/11/section/28">14% writing-down allowance</a> on the remaining pool. New or extended buildings qualify for <a href="https://www.gov.uk/guidance/claiming-capital-allowances-for-structures-and-buildings">Structures and Buildings Allowance at 3% per year</a>.
Should I buy the shares or the assets of a care home business?
The tax and commercial consequences differ significantly. An asset purchase lets the buyer set a new capital-allowances base on the acquired assets and avoids inheriting historic liabilities. A share purchase transfers the company with its full history, which can include CQC registration continuity benefits but also unknown liabilities. The right answer depends on the specific target, your funding structure and your appetite for inherited risk.
What is a propco/opco structure and is it right for a care home purchase?
A propco/opco structure separates property ownership (the property company) from care operations (the operating company). It is common in the sector as a way to protect the property from operating risk. The main tax consequence to model is the <a href="https://www.gov.uk/corporation-tax-rates">associated-company rule</a>: two associated companies each reach the 25% CT main rate at half the standard threshold. The structure must also be reviewed for its effect on Business Asset Disposal Relief eligibility on eventual sale.
Do I pay VAT when buying a care home?
The purchase of a going-concern care business is typically structured as a Transfer of a Going Concern (TOGC), which can be treated as outside the scope of VAT if the conditions are met. The property element may also be subject to VAT depending on whether the seller has opted to tax. The exact VAT position on the deal depends on the transaction structure and should be confirmed before exchange. On an ongoing basis, the operation's <a href="https://www.gov.uk/guidance/welfare-services-and-goods-notice-7012">welfare exemption</a> means input VAT on purchases is irrecoverable.
How do associated-company rules affect my corporation tax after acquisition?
Where two or more companies are associated (broadly, under common control), <a href="https://www.gov.uk/corporation-tax-rates">the CT profit thresholds are divided between them</a>. In a propco/opco structure with two associated companies, the small profits rate (19%) applies only up to £25,000 per company and the 25% main rate applies above £125,000 per company, rather than the £50,000/£250,000 thresholds that apply to a standalone entity. Groups with more associated companies divide the thresholds further.

Speak to a care sector accounts specialist.

Tell us about your situation and we will reply within 24 hours.

Get in touch