Tax Return - Allowable Repair Costs

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    Tax Return - Allowable Repair Costs

    Hi, Can anyone advise further on the allowable expense in terms of repairs and maintenance. When we brought the property it needed completely gutting and renovating, so I understand that we won't be able to claim expenses for "improvements" but what about things like replacing a boiler, carpets, bathroom, re-painting etc? Could they be classed as allowable repair costs because we have just replaced what was there or would they be classed as improvements? The property was also empty during renovations so there was no rental income - I don't know if that changes things in terms of what you can claim for expenses? Thanks in advance.

    You can claim for improvements, but not until you sell it (assuming the Capital Gains Tax regime remains the same).
    So keep records of all your expenses because they're going to be allowable in future against the capital gain.

    Whether things can be claimed as repairs is a bit of an art.
    Where you're replacing something HMRC would accept that there's an element of improvement, on the basis that a new thing is usually nicer than an older thing, and often more efficient.
    So upgrading a boiler and repainting is usually black and white.

    A bathroom can be more tricky, because it depends what you do.
    Replacing a bath is different to swapping a bath for a wet room shower.
    The same is true of a kitchen - replacing a cooker and designing a dream kitchen aren't the same thing.

    The HMRC guidance for capital expenditure refers to adding new rooms rather than updating one, and adding central heating, rather than replacing one type with another.

    What complicates your situation is my guess that you bought a run down property with a low value that reflected the condition and have, by replacing and upgrading things, increased it's capital value overall.
    Which means that there has definitely been some capital expenditure in amongst the operational expenses.

    You could legitimately:
    Go through everything and decide what falls into what category, line by line.
    Take the whole cost, work out how much more the property is now worth and deduct it from the total leaving the rest as a total of the operational cost.
    Make an educated guess to the split and allocate it that way.

    As long as it's reasonable and you could justify the approach, HMRC are usually delighted to be getting a tax return and some tax and less concerned that one year might have a deduction for a bath that's in the wrong column.

    My personal advice would be the second option, or the first if it didn't quite come out the way I wanted it to 8-)

    You claim any operating allowance as though it occurred on the first day of the first tenancy, so it doesn't matter when it actually happened (as long as it was less than six years previously) or whether the property was empty or not.

    Don't forget to tell HMRC about your new source of income when you first let the property.
    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).


      The previous new labour government had encouraged replacement of the old type gas boiler by condensing type gas boiler, so this boiler replacement cost would be reported as operating expense.

      I think if you follow jpk's recommendation to split the total cost say : one third to improvement and two thirds to operating . the split should be ok to tax office..


        Get a book on property tax. There are more than 10 taxes a Landlord may pay.

        It will save you ££££
        I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...


          Originally posted by deb_hyp View Post
          When we brought the property it needed completely gutting and renovating
          It is likely that you cannot lawfully claim the costs as revenue because the work was NEEDED, but can be claimed as capital. It is expected that you would have negotiated an appropriate price reduction to cover the need to do the work.

          However, if the replacement of items was not needed to make the property letable but simply your choice, then you can claim them as revenue expenses.


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