Simple Questions for a Tax Return

[thekingster]

Hi all,

I am currently getting everything together ready for my tax return and along the way have asked a few aacountants for advice, but seem to have a split opinion. I am using the wear and tear allowance to the furniture side of things on a flat that I rent out which is fine and I won't be claiming for any of the costs in purchasing the furniture. Problem is one accountant is telling me I can still claim for decorating on top of this, i.e paint, paint brushes etc etc costs, the other is saying i cannot as this is an improvement. In my eye this is maintenance as the place was not in a rentable condition when I brought it and is therefore an expense.

Thoughts???

Thanks in advance.

[susan 2]

This is a tricky one, and I can see why the two accountants differ. If you have just bought the place, and improved it by painting, then I believe that this year you should not claim as it comes under renovation. In fact you keep all the receipts etc and use against capital gains if you sell the property. However next year, painting then comes under maintenance and you can claim for paints, and the painter etc. Plus all the bits and pieces you buy from places like B&Q, Homebase etc.
In practise if you are not thinking of selling for some time I would include it under this year's maintenance. It is a bit of a grey area.
I have just looked this up in my copy of "How to avoid property tax" by Carl Bayley ( the best book I have found on tax) and I quote from Page 64
"Nowhere in the field of taxation is the question of capital or revenue more difficult than in the area of repairs and maintenance and/or capital improvements. When a property is first brought into the rental business, any expenditure which necessary to make it fit for use will be capital expenditure."
If you had to plaster the room and then paint it would be improvement. But if you just painted it could be classed as maintenance. It's really make your own mind up time! Best of luck.

[thekingster]

OK thanks for your advice. It has helped me loads.

[Tax Accountant]

Susan has answered the question as best as anyone else can. Well done Susan.

Just to add to what has been said: According to Inland Revenue, 'repairs are not deductible in respect of a property acquired that wasn't in a fit state for use in the business until the repairs had been carried out or that couldn't continue to be let without repairs being made shortly after acquisition'.

But repairs to make the property more presentable are allowed as an expense, even if incurred immediately after the property is purchased.

Ramnik

[thekingster]

Thats great, thanks for your help. I match this exactly, the flat was lettable when I brought it but it wasn't in an amazing condition. Just needed some brightening up!

Thanks for all your help.

[Tax Accountant]

Thats great, thanks for your help. I match this exactly, the flat was lettable when I brought it but it wasn't in an amazing condition. Just needed some brightening up!

Thanks for all your help.

You are welcome.

If possible, try to pay it forward by helping others when you have no obligation to do so.

Ramnik