Are old expense receipts still valid?

Are old expense receipts still valid?

14:18 PM, 8th February 2021, About 7 months ago 18

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Hi, I have found some old maintenance/repair (not improvement) receipts for my BTL property which date back to 2012.

My first question is: can I use them on my next self assessment tax return or have I lost out because I can you only claim for payments made in the same financial year?

Secondly, when selling a BTL property does anyone have any advice as to the best way of documenting the cost incurred for improvements over the years so as to correctly claim against CGT and also be ready should the tax man want evidence (does this ever happen?)

Many thanks.
LP



Comments

by Beaver

14:36 PM, 8th February 2021, About 7 months ago

I don't know how many years you can go back to reclaim maintenance expenses as operating cost against the current year. If you are cash-accounting and the cash hasn't moved until the present year I'm guessing it doesn't matter and you can probably just claim them when the cash moves.

But if you have not claimed the expenses in previous years they can be offset against your CGT bill.

by Gunga Din

14:38 PM, 8th February 2021, About 7 months ago

Last six years IIRC.

by Olls63

14:55 PM, 8th February 2021, About 7 months ago

You would have to make an overpayment relief claim, the normal time limit for an claim is 4 years from the end of the relevant tax year.
Expenses are either capital or revenue in nature, because you didn't claim revenue expenses with the required time frame, you can't then decide that they are capital in nature, and include them in a CGT calculation.

by Beaver

14:59 PM, 8th February 2021, About 7 months ago

Reply to the comment left by Olls63 at 08/02/2021 - 14:55
Not sure that's correct. I think that depends upon the nature of the expense.

by p118a

15:13 PM, 8th February 2021, About 7 months ago

Reply to the comment left by Beaver at 08/02/2021 - 14:59
I would agree with Olls63. The only mechanism for relief is an overpayment relief claim, unless the Self Assessment Return is still able to be amended.

It is a question of fact whether an expense is revenue or capital. You cannot choose facts to suit your situation. For example painting and decorating is only a revenue expense and cannot be treated as a capital improvement to the property.

by silversurfer2017

15:27 PM, 8th February 2021, About 7 months ago

Not sure regarding expenses but thinks it probably works both ways. If you found that you had income from several years ago that you had forgotten to declare I am sure that HMRC would expect you to be honest and declare it as soon as possible on your next tax return.
Again not sure, but I think that the six year rule only really applies to record keeping. If you had a load of income, say 10 years ago, and on purpose you did not declare it and HMRC found out about it then I feel sure you could be prosecuted - would have to pay the tax due plus a sizeable penalty.
Regarding improvements for CGT purposes it's really up to you to keep paperwork for these improvement which sometimes can be for substantial amounts, for example a lease extension, especially if marriage value was involved could easily have cost over £20,000. This figure is added to you original buying cost of the property. Obviously if you extend the property then the cost of the extension is a capital cost. Some costs are a bit of a grey area. If you have timber window frames that have gone rotten and it is cheaper to replace them with new PVC windows then some accountants will consider this to be repairs and not capital expenditure.

by Beaver

15:54 PM, 8th February 2021, About 7 months ago

Reply to the comment left by at 08/02/2021 - 15:13
I know: Painting and decorating is the only specific example that HMRC gives and if that's what the expense was I don't think you could claim it against CGT if you hadn't already done it.

I think it depends upon what the expense is.

by Olls63

15:58 PM, 8th February 2021, About 7 months ago

Reply to the comment left by at 08/02/2021 - 15:27
Strictly speaking they are repairs, you had windows, and after the work you still had windows.
From HMRC BIM46920
Care needs to be taken as the use of modern materials may give an apparent
element of improvement because of the greater durability, superior qualities
and so forth of the new material. The reality may be that the work simply
means the asset is in a fit state to be used as before; it does not do a different
job or a better job.
The position is that the work will be:
 a repair and not an improvement if after the work is carried out, the asset
can just do the same job as before
 disallowable as an improvement if more can be done with the asset, or the
asset can be used to do something that it could not do before.

by Beaver

16:12 PM, 8th February 2021, About 7 months ago

Reply to the comment left by Olls63 at 08/02/2021 - 15:58
True.

I know the following example is not directly applicable to this case, but....

If you were a property developer, you bought a property and decided to turn it over, i.e. just do it up and sell it rather than rent it out, then you would be able to deduct the costs of your "doing the property up", including the painting and decorating, from your capital gain.

So even though painting and decorating is the only example HMRC gives on gov.uk of something you can't claim, what's on gov.uk is not necessarily the law:
In any case it depends upon the context and what the purpose of the work is. Painting and decorating isn't always revenue expenditure, sometimes it's capital expenditure.

So I still think it depends upon what the nature of the expense is.

by p118a

16:18 PM, 8th February 2021, About 7 months ago

Reply to the comment left by Beaver at 08/02/2021 - 16:12
If you are buying and selling as a developer then the property goes in the accounts as stock, with repairs being part of the work in progress on that stock, so is treated differently to landlords spending money on their property held as a capital investment.
I still do not think you would treat painting & decorating as a capital expense for a developer, but it would be deductible against the profit from the sale of the property as part of the WIP.

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