Capital improvement declaration on SA form?

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    Capital improvement declaration on SA form?

    Hi folks, hope someone with more knowledge than me can answer a quick question on a tax matter.

    As you'd probably guessed... I'm just finalising my SA for 2013/14 and am debating with myself whether I should submit a central heating refit/install I had done as a revenue expenditure or a capital improvement. It's quite easy to justify it either way to be honest, since the old heating system was pretty much shot and not 'acceptable' from a tenants perspective - so although not technically broken, it needed to be 'repaired' or 'improved' as it wasn't an effective heating system and the tenant was struggling to keep the house warm. A repair wasn't economically sensible, so a new GCH system was fitted (old system was an electric 1970's underfloor heating system and very inefficient!) - so it could be an 'old for new' repair, or it could be an 'improvement'. There is much room for interpretation on this one I believe (judging on other things I've read).

    I have done a lot of other redecoration/repair work which will definitely be classed as revenue expenditure (tenants trashed the place - needed a lot of work), so I'm looking at a loss for 2013/14 tax year anyway. I don't want to make this loss too high otherwise it'll take 2-3 years of future rent at 100% occupancy to absorb it... In which time I may be looking at selling, so I'd loose it.

    So, I'd rather declare the new heating system for CGT relief as an improvement.

    My question is: Is there somewhere in my tax return where I have to declare this 'Improvement cost' NOW for later use, or do I just keep it in my records and then declare it at the time of the property disposal? I haven't done this before as you can probably tell :-) If I don't declare it somehow now, do I run the risk of loosing it later?

    I have no experience of CGT other than I know I'll probably get hit pretty hard when the time comes. I just don't want to slip up by accidentally not declaring a capital improvement if I have to.



    Many thanks

    #2
    Any expenditure for CGT purposes is only reported to HMRC on the disposal of the property.

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      #3
      Flexy,

      Can I make a suggestion if it's not already too late:

      Keep the underfloor heating system in place as a backup. Then any time the central heating breaks, tenant still has some way of keeping warm.
      To save them chiming in, JPKeates, Theartfullodger, Boletus, Mindthegap, Macromia, Holy Cow & Ted.E.Bear think the opposite of me on almost every subject.

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        #4
        Thanks King_Maker, I was pretty sure that was the answer, but I wanted to make sure so I don't miss out on a possible CGT relief.

        JKO, That is still technically possible (although its effectiveness is in question!), so I have kept that option open. Thanks!

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          #5
          Out of interest, what would be everyone's thoughts on whether this could be declared as either an expensive or an improvement (the age old question!)?

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            #6
            It is probably an allowable expense.
            Replacing something old with something newer usually brings about an improvement.

            But you could equally argue that the existing heating system is still there and this is an addition.

            People want "rules" when there's only "guidance" available.
            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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              #7
              jpkeates,

              Yes I do think I could go either way with this one.. It's nice to have the choice!

              Thanks.

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