Allowable expenses with regard to renovation / repairs

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    Allowable expenses with regard to renovation / repairs

    I am in the process of completely stripping out and renovating a flat that I rent out to bring it back up to a good, solid spec.

    Does anyone have any insight into what classifies as an allowable expense for tax purposes, or what would be "improvements"?

    The flat seems to have been a particularly badly done conversion of a late 1800's end of terrace into two one-bedroom flats. The walls and ceilings are (were!) all old lathe & plaster, so were soft (ceilings had started sagging badly) - replacing these with plasterboard and insulating properly. Improvement or necessary repair?!

    Single glazed windows were not keeping the noise or pollution from an increasingly busy road outside at bay - so replaced with double glazed, properly fitted, noise reduction units.

    Rewiring - I would hope that this classes as essential works?

    Kitchen replacement - similar spec / layout - the doors were all busted, cabinets wrecked and it was a very tired, 20+ year old kitchen.

    I am hoping that most of the works will count as allowable expenses, but suspect that there will be a limit?

    Many thanks in advance for any help.

    #2
    There's going to be a split between repairs and maintenance (allowable against income) and capital improvements (allowable, currently, against any taxable capital gain on disposal.

    If you bought the property at a lower value than otherwise and your renovations are bringing it back to how it should be, they're probably capital.
    If you're simply replacing an old thing with a new thing (even if it's better - because that's probably inevitable - they're probably maintenance.

    This is an art rather than a science - so you need to consider how you would justify the treatment of each expense, and allocate them accordingly.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Make sure you discuss the work with Building Control, as you are likely to be triggering building regulations, and, it was badly converted, it may not meet, in particular, modern fire safety requirements.

      Also, the windows are currently not keeping in the humidity either, so you probably need to budget for ventilation improvements.

      Comment


        #4
        jpkeates,

        Thank you.

        Comment


          #5
          leaseholder64,

          That is a good point - thank you. I will look into it.

          Comment


            #6
            and don't forget mileage travelling to and from the job can be claimed if your business is already 'operating'. I'm not sure what happens if its your first BtL - so you nay want to use an accountant even if only for the first few years until you understand the process.

            as for BR consultation, have you checked with planning that the conversion is 'legal'?

            Comment


              #7
              Expenses incurred before the business is operating which are wholly and exclusively for the business are claimable as though they were incurred on the first day of the first tenancy.

              One tip is it make sure that your car is insured for occasional business use. Most policies cover driving to a regular work place, but not being used for a business purpose.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment


                #8
                I thought owning a property and renting it out as a private landlord was not classed as a business? if that is the case, why would occasional business use for a vehicle be required?

                Comment


                  #9
                  Originally posted by MisterB View Post
                  I thought owning a property and renting it out as a private landlord was not classed as a business? if that is the case, why would occasional business use for a vehicle be required?
                  Tax man and insurance companies have different views according to what gains them the greater amount of money.
                  To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

                  Comment


                    #10
                    Originally posted by MisterB View Post
                    I thought owning a property and renting it out as a private landlord was not classed as a business?
                    The view that letting property isn't a business simply makes no sense in the real world, it's a fiction designed to increase tax revenue.

                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment

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