Carpets and Redecoration to increase sale value – Capital or revenue cost?

Carpets and Redecoration to increase sale value – Capital or revenue cost?

9:08 AM, 14th April 2022, About a month ago 4

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Last year I had 2 properties vacated and decided to sell them both. I have owned both for around 16 years and they have been tenanted during that time

To improve the resell value, I had both redecorated and new carpets throughout

Normally I would put both the redecorating and replacement carpets as a revenue expense in that year if I was planning on re-letting

However, as I have no intention of reletting and the cost of redecoration and carpets was to improve the sales value – should they actually be classed as capital expenses and not revenue.

Any thoughts appreciated before I get stuck into my tax return.

Many thanks

Mark



Comments

by david porter

11:04 AM, 14th April 2022, About a month ago

As with most financial forcasts the answer is to do a spread sheet.
Calculate income tax versus Capital gains tax.
This is the first step.

by moneymanager

11:39 AM, 14th April 2022, About a month ago

It isn't a matter of choice but of law, I would advise you to review the Property Income Manual which indicates that these categories are revenue expenses

by Rod

14:03 PM, 14th April 2022, About a month ago

As David says, it depends whether you are looking to minimise your income tax or CGT liability, subject to the Revenue's guidance.

My understanding is that this expenditure would be viewed as capital, since it was incurred to enhance the sale price, not for achieving a new tenancy or higher rent.
The cost would be unlikely to be disputed if you had no tenancies between the expenditure and the sale. A similar argument would probably apply for finance costs and other holding costs.

Your accountant or tax advisor will confirm.

by Ian Haynes

9:15 AM, 19th April 2022, About a month ago

It doesn't matter what you would like the costs to be - if they are revenue expenses then that it that and the same with capital costs.

This is a self-assessment issue and as the name suggests, it's down to the individual to make the appropriate claim on their return.

Interestingly, you don't mention if you have bought more let property - if so, these costs could be relieved against other rental income at possibly a higher rate of relief than if used against a CGT disposal. You can carry forward rental losses for three years even if you don't acquire another let property until then, and as long as you have something being let, the loss is just carried forward unless used.


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