Refurbishment – claimable allowance or capital outlay?

Refurbishment – claimable allowance or capital outlay?

12:07 PM, 28th April 2014, About 10 years ago 23

Text Size

Hi,

I wonder whether anyone can help me on this please?

I recently bought 2 houses both of which were in run down old fashioned condition as follows:

Property 1 had been owned by 2 elderly brothers. Overall dirty, old fashioned decor. Filthy ‘doggy smelling’ carpets. Dated kitchen and bathroom and in my opinion would not have rented out to anyone without a revamp which I have done and now looks great – cost around the £5000 mark.

Property 2 had been rented out for the last 25 years with little done to it in that time beyond decorating. Decor fine (if you like artex!?). Old fashioned kitchen and bathroom and archaic gas fires x2 one of which had a back boiler for hot water and central heating.
Here I replaced one gas fire with a good looking modern electric fire and the other was removed and a new gas combi boiler installed along with modernisation of heating system with system flush, Magnaclean, trvs in each room etc etc. Plus updated fuse box and electrics (not full rewire). Old lino replaced with ceramic floor tiles. Modern kitchen units and bathroom suite installed in place of the old ones.

My question is this:

My accountant told me that because the revamps were done before any tenants moved in, the outlays are capital costs and not allowable costs against income, but I would argue that without the refurbishments first the properties would not have been in a rentable condition – all outlay went on bringing the properties up to modern standards, like for like and nothing put in that wasn’t there before, ie no extensions, loft conversions or anything like that.

I’m sure that this has been encountered by lots of landlords before and I would be grateful if someone could help please?

Thanks!

Annerefurbishment


Share This Article


Comments

Michael Barnes

13:21 PM, 1st May 2014, About 10 years ago

Reply to the comment left by "Danny Clitheroe" at "01/05/2014 - 12:24":

ICTA 2005 s308(1)(b) is for furnished lettings.

Furnished lettings still have a renewals allowance. It is unfurnished lettings that are affected.

Ben Wilson

13:47 PM, 1st May 2014, About 10 years ago

MdeB, can you point me to where it says there is still a renewals allowance for furnished lettings? All that is left I think is the 'wear and tear allowance' which only applies to *fully* furnished properties.

Michael Barnes

14:05 PM, 1st May 2014, About 10 years ago

Reply to the comment left by "Danny Clitheroe" at "01/05/2014 - 13:47":

The following is an axtract from a reply from HMRC to my question on renewals allowance for furnished lettings:

"Property businesses with Furnished lettings can claim relief under the statutory renewals allowance (s.68 ITTOIA 2005 for Income Tax purposes and s.68 CTA 2009 for Corporation Tax purposes) ".

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now