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    Novice

    Hi,

    I'm new to this and need some help. My rental property has had no work done to it for years; I was told that the kitchen was installed in 1989 - 5 units in total. As it's a large kitchen, I got a new kitchen with 8 units fitted. I've been reading up on this and is it correct that I cannot claim the kitchen as a repair?
    If I can claim a proportion, will that be 5/8th of the total price or can I just take off the price of the 3 extra units + 3/8ths of fitting price?
    Flat pack kitchens were the same price as a Howdens kitchen (got a good deal), but as it's a Howdens, does that mean it will that be classed as an improvement and so not be able to claim anything at all as a repair (ie capital only)?

    #2
    It depends.
    Had the original kitchen remained pristine since installation would the property be worth roughly what it is worth after the replacement.

    In any replacement there will be an element of improvement (betterment) so it isn't ruled out as a repair/replacement simply because what you end up with is better.
    If you have significantly improved the property you can apportion the work to an element of repair and an element of betterment.

    You don't lose the cost of the improvement entirely, that element would be offset against any capital gain on disposal.
    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
      Thanks jpkeates. I had a chat with the previous owner and he says it was an MFI kitchen of 'good quality'. If it had stayed in pristine condition and comparing that to what I've put in, I'd say the difference in property value would be minimal: an increase of around the £1000 mark with the new kitchen. The kitchen cost £3000 for supply and fit.
      When I come to do my tax return, would I then apportion £2000 to repair/replacement and £1000 to improvement/capital?

      p.s If I sold the flat, someone else would want to improve the kitchen further or replace it altogether. There's no fancy lights or integrated appliances etc The only change I've made would be the 3 extra cabinets. There's a lot that could be done with the remaining space.

      Comment


        #4
        I may not be doing it right, but I have always treated a situation like this as 5/8 repair (deductible from the year's income for tax purposes) and 3/8 capital expenditure.

        I would not be concerned with how much the worth of the whole property would change because of the work: that is extremely subjective and in any case will come out in the wash when CGT is eventually payable on sale or IHT on death.

        Comment


          #5
          I'd be tempted to put the whole thing down as maintenance.
          There's not hard and fast rule about this - HMRC talks about adding whole rooms as betterment and you started with a kitchen and ended up with a kitchen.
          If you added an Aga or it was a designer kitchen that might be different.

          CGT is a future possibility (the whole regime might change at any point) while maintenance is something of benefit now.
          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


            #6
            Hi MickyV, Is capital expenditure related to CGT? Just want to make sure I understand this - if I put 3/8 as capital expenditure, do I note that on the tax return for 15/16 or does that only come into the equation once I sell the flat or my kids inherit it? ie is there a section on the tax return where I need to note it now? (3/8th of the total spend comes to around £1100)

            Comment


              #7
              As regards HMRC, you don't need to do anything about the capital expenditure until you (or your estate) sell the property.
              So make sure your records are kept properly and other people know about them - otherwise the allowance will be lost.
              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
                Hi Jocat11
                I have never got to the position where I have sold a rental property yet. However, as I understand it, you do not include it in your 15/16 return. However, you need to keep record of the Capital Expenditure so on eventual sale or other disposal it reduces the CGT payable.
                Regarding your kids inheriting it, I think I am right in saying that your Capital Gains liability dies with you and IHT becomes payable on the estate. So at that point the capital spend becomes irrelevant. That is another good reason for classing as much as you can legitimately do as "repairs" (so saving Income Tax this year).
                Like jpkeates says, in reality for this particular case you might consider putting it all down as maintenance. I would have thought a challenge from HMRC would be unlikely and if you got one you might well be able to justify the classification on the grounds that the 2016 equivalent of a 1989 5-unit kitchen would have 8 units. Happy for somebody more expert to correct me, but my understanding is that replacing something with its modern equivalent does not count as betterment. A classic example is replacing old wooden windows with new PVC ones.

                Comment

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