Can costs of 'tarting a house up for sale' be deducted from CG liability on disposal?

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    Can costs of 'tarting a house up for sale' be deducted from CG liability on disposal?

    E.g. decorating, carpet cleaning, like-for-like replacement and so on. Or is this money effectively 'lost' if not set against rental income?

    #2
    It's not lost, if there's not enough income to offset, it can be carried forward as a loss to be offset against future income.
    It's not allowable against a capital gain.
    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).

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      #3
      If you present your property for sale in good condition, you should be able to justify a £3k - £5K higher sale price and find a buyer more quicker. Even monthly mortgage payment costs money if it takes a longer time to find a buyer.

      Comment


        #4
        No these are not capital expenses.

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          #5
          I agree these are not capital expenses, but then estate agent fees aren't either. You can sell without an estate agent just as you can sell without decorating. You may get a better price with the estate agent. You may get a better price decorating prior to sale. So an estate agent is optional, as is presenting your house in good condition. I'm struggling to understand what makes these two different?

          But that doesn't really matter I suppose. Can any of you give me gov.uk links to back up what you're saying?

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            #6
            Estate agents fees and legal fees are capital expenses

            https://www.gov.uk/tax-sell-property/work-out-your-gain

            Comment


              #7
              Originally posted by lllccc View Post
              I agree these are not capital expenses, but then estate agent fees aren't either. You can sell without an estate agent just as you can sell without decorating. You may get a better price with the estate agent. You may get a better price decorating prior to sale. So an estate agent is optional, as is presenting your house in good condition. I'm struggling to understand what makes these two different
              Lots of legitimate business expenses are optional.
              HMRC doesn't regulate that you run your business sensibly, or at maximum profit or care if you make a (legitmate) loss.
              Using an estate agent is a choice you can make, and, if you elect to use one to sell a business asset, you'll make less money, but it's an allowable expense.

              The "tarting up" costs are simply a matter of timing.
              You could have decorated and had the carpets cleaned at any time and they'd have been allowable maintenance expenses.
              You chose to do it before selling the property.
              That doesn't change how they're treated for tax.
              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've read this link and it's open to interpretation. It says sales costs 'including' not sales costs 'limited to', indicating it is not an exhaustive list.

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                  #9
                  Originally posted by lllccc View Post

                  I've read this link and it's open to interpretation. It says sales costs 'including' not sales costs 'limited to', indicating it is not an exhaustive list.
                  It is entirely unambiguous and even gives an example. "costs of improvement works, for example for an extension (normal maintenance costs, such as decorating, do not count)"

                  Even replacing a boiler does not count - so why do you think sweeping the carpets would count as a Capital Expense.....

                  Comment


                    #10
                    Originally posted by jpkeates View Post
                    Using an estate agent is a choice you can make, and, if you elect to use one to sell a business asset, you'll make less money, but it's an allowable expense.
                    Agreed. This is not open to interpretation because it's explicitly given as an example.

                    Originally posted by jpkeates View Post
                    You could have decorated and had the carpets cleaned at any time and they'd have been allowable maintenance expenses.
                    And indeed, if you did this 6 months before the sale date, or before you'd even decided to sell it would look pretty suspicious trying to claim it as a sale cost.

                    Originally posted by jpkeates View Post
                    You could have decorated and had the carpets cleaned at any time and they'd have been allowable maintenance expenses.
                    You chose to do it before selling the property.
                    Equally you could also do this after the house was put on the market and produce documentary evidence to the effect. This way someone would have a hard time proving this wasn't part of the sale costs (assuming the property wasn't then let before the sale, again you could prove this)

                    I don't really want to get drawn here on the fairness of the tax system, as it gets highly opinionated, just on the wording of the guidance. If I had no input from any people here, I would assume that I could offset all sale preparation costs against the gain, including e.g. the mileage costs of driving to the property to change the light bulbs to substitute them for something brighter prior to the viewings (for which I may make a special trip), costs of staging furniture and so on.

                    There are a bunch of other grey areas as well: Use fixed fee estate agent to sell, fail to sell, go back to renting for a year, use another fixed-fee estate agent to sell a year later, can you offset both fees against CG liability or just the last one? etc, etc...

                    Comment


                      #11
                      Originally posted by AndrewDod View Post

                      It is entirely unambiguous and even gives an example. "costs of improvement works, for example for an extension (normal maintenance costs, such as decorating, do not count)"

                      Even replacing a boiler does not count - so why do you think sweeping the carpets would count as a Capital Expense.....
                      Because preparation for sale is not a 'normal' maintenance cost. Sale is an abnormal/extraordinary event.

                      Comment


                        #12
                        Originally posted by lllccc View Post
                        I've read this link and it's open to interpretation. It says sales costs 'including' not sales costs 'limited to', indicating it is not an exhaustive list
                        It's not possible for HMRC to give exhaustive lists, all tax is as much an art as a science.
                        However, the advice you are being given is almost certainly correct.
                        The work you have described is allowable against income and is not capital in nature.

                        You are, of course, free to believe otherwise and submit a tax return as you see fit.

                        HMRC publish much more detailed tax manuals which you can search and there are many books available on property investment tax and CGT generally.
                        And there are any number of accountants who will offer advice - who's fees will also be allowable against income (provided you don't ask questions that are unrelated to your business).
                        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


                          #13
                          Originally posted by lllccc View Post
                          There are a bunch of other grey areas as well: Use fixed fee estate agent to sell, fail to sell, go back to renting for a year, use another fixed-fee estate agent to sell a year later, can you offset both fees against CG liability or just the last one? etc, etc...
                          That's not ambiguous either. Costs of attempting to sell, failing, and then going back to renting are not claimable against anything (they are not rental expenses or capital expenses).

                          Comment


                            #14
                            Originally posted by jpkeates View Post
                            It's not possible for HMRC to give exhaustive lists, all tax is as much an art as a science.
                            And from talking to other people who've taken time to argue the toss with them it seems they can be flexible if one persistently argues one's case.

                            Originally posted by jpkeates View Post
                            HMRC publish much more detailed tax manuals which you can search
                            I've been looking for such information and failed to find it relating to the above. I would appreciate any links you could share.

                            Sorry if I'm coming across as confrontational here, and I'm not suggesting anyone is wrong. I just want to verify in my own mind that the advice given matches the HMRC guidance.

                            Comment


                              #15
                              Originally posted by lllccc View Post
                              I've been looking for such information and failed to find it relating to the above. I would appreciate any links you could share.

                              Sorry if I'm coming across as confrontational here, and I'm not suggesting anyone is wrong. I just want to verify in my own mind that the advice given matches the HMRC guidance.
                              You may regret it - under C
                              https://www.gov.uk/government/collections/hmrc-manuals

                              You're not being confrontational, it's just that this is a fairly common situation and a reasonably common question and you're asking people who are confident in their answers (on this particular subject, at least).

                              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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