Fire break wall – Capital Expenditure or Revenue Expenditure?

Fire break wall – Capital Expenditure or Revenue Expenditure?

14:28 PM, 14th September 2022, About 3 weeks ago 8

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Hi all.

Hopefully, somebody on this superb property resource can help me with a tax query.

At the request of my landlord buildings insurance, I have recently had a fire break wall installed in the loft space, which is shared between one of the neighbouring properties.

The cost was divided between us both.

I’m trying to determine if this expense is deductible as Capital Expenditure or Revenue Expenditure.

Can anyone please advise?

Thanks in advance for your kind attention.

Mark



Comments

Mohammed Kadir

10:10 AM, 15th September 2022, About 3 weeks ago

The general rule is that cost of repair is a revenue expenditure, but improvement and alteration are treated as capital costs.

Since it wasnt a repair and the fire break wall didnt already exist, then my guess is that its a capital expense. It is an alteration from the previous state.

David Smith

10:14 AM, 15th September 2022, About 3 weeks ago

Definitely a Capital Cost as it’s an improvement and not a replacement or repair.

Laura Delow

10:21 AM, 15th September 2022, About 3 weeks ago

Repairs and maintenance expense is the cost incurred to ensure that an asset continues to operate. Replacing the oil filter in a truck is considered a maintenance cost, while replacing the roof of a building extends the life of the building, and so its cost will be capitalized. Having said this, I have personally experienced a collapsed roof that had to be totally replaced (like for like) for which we got HMRC approval as an allowable expense, but altering or improving the asset even if instructed to do so by your insurer, is not a repair & therefore I believe is not an allowable expense.

Ross Tulloch View Profile

11:37 AM, 15th September 2022, About 3 weeks ago

I have always treated any replacements (boilers, kitchens, bathrooms etc) as revenue items. I have three times replaced windows, (single to double glazed at £25k a time by local authority) as revenue as well. Of course the new windows, kitchen etc are better than old usually, but still revenue, as the are replacements. An extension or central heating when there was none at all, would be capital. So i guess your loft wall is technically capital, but cannot think a small item like that would matter.

Jw Bryan

11:47 AM, 15th September 2022, About 3 weeks ago

Hi Laura,
Thanks for you helpful post. Is the advice on the repair/improvement distinction HMRC's advice, or does HMRC base their advice on Court decisions regarding S27A of the LTA 1985?
There have been endless cases on this -- quite a nice little earner for lawyers!

Beaver

12:25 PM, 15th September 2022, About 3 weeks ago

So....is this an existing wall that needs to be extended upwards to meet the roof to create a fire break? And if this existing wall needs to be modified to meet current safety standards for this property to be rentable isn't that a legitimate expense to offset against revenues?

Laura Delow

12:28 PM, 15th September 2022, About 3 weeks ago

Reply to the comment left by Jw Bryan at 15/09/2022 - 11:47 I've no idea on what HMRCs decision is based. When we challenged/won our own case, our accountant did this on our behalf but I have no idea of what basis it was agreed would be an allowable expense.

Propman84

19:30 PM, 19th September 2022, About 2 weeks ago

Thanks very much everyone for your replies. It's much appreciated. I can now move forward with my decision.

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