Redecorating after renting ends, before sale of property

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    Redecorating after renting ends, before sale of property

    Is it possible to claim redecorating (paint, carpets..) after letting a property out, before selling.

    This would be allowed as an expense against receipts for an unfurnished let in between tenancies, to maintain standard for the next tenant.

    However, is it allowed in order to clean up the property for sale?

    I can't find any specific guidance.

    Thanks.

    #2
    Yes.

    You could also probably claim it as a capital expense if it suited better.
    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
      With no tenant nor any intention to let, none of those expenses look to be deductible either for Income Tax or CGT.

      Comment


        #4
        In answer to jpkeates: I don't agree about claiming as capital expenditure. There are very strict rules about the difference between the two. Capital expenditure is about improvements to the property, eg an extension, or installing central heating for the first time. Expenses are to make good wear and tear, eg repairing faults, like-for-like replacement such as a worn out CH boiler, repainting...

        An interesting evolution of this distinction was about 10 years ago, when hmrc allowed replacement of wooden glazing with uPVC as an expense. It used to be a capital improvement, and you would have to wait to deduct it from CGT on sale. It was changed to reflect that it is NOT regarded as an improvement now. Few people would re-install wooden windows.

        in an unfurnished let, there is no concession for a blanket percentage to cover wear and tear, as in a furnished let. Everything has to be supported with a receipt.

        Expenses are allowed all the way during letting regardless of tenants changing.

        My question is what is allowed after the last let, when the property is empty and waiting to be sold on. It will likely be in a bad state, and would need an overhaul to some extent to make it saleable. I don't think the answer can be guessed or assumed. As an example, if you live in a property as main residence, and then move out to let, you can't claim back anything spent BEFORE the first tenants move in .. unless the law has been changed recently.

        I'm ideally looking for a reference to substantiate anyone's answer... please.

        Comment


          #5
          You can claim for qualifying pre-rental expenditure, before the first tenant moves in. It is deemed to be incurred when the tenancy starts.

          However, after the rental business has ceased, there is no income from which the expenditure can be deducted.

          http://www.hmrc.gov.uk/manuals/pimmanual/PIM2505.htm

          Comment


            #6
            The business continues until the rental property is sold in my view.
            The sale may be part of the process of winding down the business. Imagine that there are several properties in the business, the business is ongoing until the last one is sold - properties may join and leave the portfolio, but the business continues.

            Imagine you were simply refurbishing routinely for new tenants and then couldn't find any or just changed your mind a few month's later - HMRC aren't mind readers and you are not required to document your current plans (which may be mistaken)..
            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


              #7
              jpkeates,

              For a single property rental business, that is not HMRC's view (nor mine).

              Comment


                #8
                Thank you both so much.
                I now think redecorating WILL be allowed.

                The page following the link above, PIM2510, deals with cessation.

                Most of it deals with multiple properties. Filtering out the rules for a single property makes it simpler: there is no depedency to a specific property on what's happening to the others.

                "...a rental business ceases when the last let property is disposed of or starts to be used for some other purpose..."

                If it's not used for any other purpose, for example as a private residence, then cessation is when it is sold. The last let property is the only one, and "disposed" means sold.

                Further down there is provision for taxation and tax relief even AFTER cessation, but under DIFFERENT tax rules:

                "...A receipt which arises from a rental business after it has ceased is taxable under special rules provided, of course, the taxpayer has not already included that receipt in the computation of their rental business profits..."

                and for tax relief:

                "...example might be the cost of background heating for empty premises to keep down condensation and so maintain the value of the property for later sale..."

                This appears to be more useful for multiple properties, in case it was not clear that simple expenses offset against (previous) rent would be allowed.
                Last edited by AnOutrage; 02-03-2015, 09:46 AM. Reason: make clearer

                Comment


                  #9
                  ...ALSO... from PIM2505, the direct link given above:

                  "...The question of when a rental business starts normally only arises, therefore, when a taxpayer receives income from property for the first time, or begins to exploit their land and property for a profit for the first time..."

                  So I stand by my opinion that if you are changing a private residence to be let, you can't claim anything done before the first tenants move in. Otherwise you could completely run down an initially immaculate property for years of private use, then claim the restoration on future tenants.

                  It's different if you BTL. You would be paying less for the run down property and would have to bring it up to acceptable standard between puchase and initial let. So the cost would be allowed.

                  Comment


                    #10
                    A property investment business is a business if it has one or more properties.

                    The business doesn't cease until it does, which is a matter of fact.
                    Disposal of all or the only property is pretty definitive, although there might be allowable expenses arising afterwards pertaining to prior issues.
                    Moving into the property to live, or allowing someone else to move in might be indicative/conclusive.

                    None of this is 100% provable, or certain, although the HMRC guidance states when a property rental business normally ends - see above, "a rental business ceases when the last let property is disposed of or starts to be used for some other purpose".

                    If you rent your own property, at some point you bring that property into the business, and the situation about costs are not as cut and dried as not being allowed until the property is rented. The property might be perfectly inhabitable but not rentable, and costs to make it rentable would be allowed (but probably not while you're living there).
                    Let's take a run down house you live in. If you were to move out and start to update it to a proper rentable condition, what could easily be an allowable expense.
                    When you move out, you bring the property into the business (your PPR calculation for CGT is affected by that for example, and HMRC can't have it both ways).

                    A common issue is central heating, perfectly fine when you live there, but the boiler isn't acceptable for an annual gas safety certificate for some reason - inhabitable but not rentable.
                    The replacement central heating cost would be an allowable expense.

                    Please read into my statements, I believe, I assert, I believe is the case, this is what I would do in the situation.
                    None of this is a science, it's all an art form and it's even difficult to use the HMRC guidance notes, as each inspector has considerable leeway and discretion.
                    If you produce a return are open about the figures and can explain your reasoning you should be fine (conversion to palaces notwithstanding).
                    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


                      #11
                      I think that if you have lived in a property for a considerable time, say 10 years, there is precious little that you are going to be able to claim to "update" the property. In the boiler example, you are going to have to prove that you didn't wear out the boiler by your own use - and many recent combi boilers have only had a usable life of about 7 years.

                      Only any legal requirements for letting that do not apply to private ownership would be clearly allowable, eg an EPC.

                      I you are going to buy and live in a property for a short time, say a year, while updating it, then it would be wise to have the exact condition recorded at the start to substantiate a claim for expenses... and even then I think personally that hmrc would view your private habitation as suspicious.

                      Comment

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