Are Council mandated improvements deductible from income or a capital expense?

Are Council mandated improvements deductible from income or a capital expense?

8:39 AM, 3rd May 2017, About 5 years ago 6

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Following a change in regulations in January 2017, my Council have insisted that I upgrade a fire alarm in my HMO. It will cost £000’s, which is fine – especially if I can deduct it from income tax rather than capital gains!

The alarm was formerly compliant and the expenditure is non-discretionary. “Spending to preclude illegality” is not my idea of an improvement to the property – it seems more like maintenance to me. It’s certainly not adding a swimming pool.

How would HMRC see it – deductible from income or capital expense

Any thoughts appreciated.

St Jims


Neil Patterson View Profile

9:09 AM, 3rd May 2017, About 5 years ago

Although it has been requested by the Council HMRC may see the new alarm as a capital improvement, because you are making a change that allows you to conduct your business rather than on ongoing repair.

I may also be completely wrong so you should consult your accountant.

Ross Tulloch

11:29 AM, 3rd May 2017, About 5 years ago

As I understand it, it is merely upgrading / maintaining existing, rather than a major (capital ) improvement. Like a smart new kitchen replacing a grotty old one. Or complete decoration or a new bathroom. All against rent

Capital items would be extensions, or probably double glazing replacing single glazing or other major improvements, like central heating where there was none.

Ian Cognito

13:14 PM, 3rd May 2017, About 5 years ago

The general principal is that replacing old with something better will not normally be considered a capital expense if the replacement is now "today's standard". eg. double glazed upvc frame windows replacing single glazed wooden frame, efficient condensing boiler replacing old inefficient floor mounted.

My gut feeling (which could be wrong) is that the alarm upgrade is essential maintenance which will bring the system up to today's standard.

If the upgrade will result in a system that exceeds what is legally required, then the council may not be able to enforce it.

Ross Tulloch

13:21 PM, 3rd May 2017, About 5 years ago

Reply to the comment left by "Ross Tulloch" at "03/05/2017 - 11:29":

I think Ian Cognito is right about double glazing...


9:55 AM, 8th May 2017, About 5 years ago

HMRC do seem to pick and choose here - as in them allowing you to deduct the cost of a replacement built-in fridge but not a free-standing one - but if you follow their stated principles (what else can you do?), then I would say you should deduct this income. The fire alarm is not going to increase the capital value of your property, and you are being forced to install it, and it is only an upgrade to what you have at the moment, so a deduction from income seems to me to be appropriate. Of course you can ask your accountant but there can be a lot of debate amongst them too on such matters - see AccountingWeb.

Ian Cognito

12:08 PM, 8th May 2017, About 5 years ago

How about you deduct from income and attach a brief note explaining what you did and why?

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