offsetting cost of tools

[fade2grey]

I have a property which is rented out, although there is no immediate need for work to be done on the house, it's only a matter of time. Are there any cost limits & justifications needed to purchase tools for use on a property? Do they have to be used exclusively on that property? or would they be mine to use on any & all? Are there any limits on selling them should the need arrise? The tools I'm looking at buying arent cheep but should do the job for sometime, at around 600gbp they out weigh most 'odd jobs' if I was to get a contractor in to do them. If I intend to offset them, do I just need a normal reciept or does it need to include property details?

Any info & advice appreciated.

Cheers!

[Melboy]

As far as I am aware you cannot off-set the purchase of 'tools' against your rental income on your rented property.

If you have any doubts or need firm advice then a quick phone call to the IR and Customs help desk will assist you.

Mel.

[Simon Dewsberry]

Hi

To The letter of the law no you cant claim them ! but there are always creative accounting ways to get them in there some where! Think out of the box.

Most repairs / wear and tear can be claimed at 10 % of property income automatically wether you have done any work or not and over the years you will almost certainly find that this will give you extra "profit " not "loss"

Plym ??!!

will almost certainly give her advice shortly !

Simon

[plym77]

Hi all

I have edited this post as I seem to have had a bit of a mad moment yesterday and not really explained my reasoning behind my answer - and so I believe this needs further clarification

You cannot claim Capital Allowances on Plant and Machinery supplied with the property, so furniture, garden equipment etc.

However, you can claim Capital Allowances for equipment used in the rental business (ladders, tools etc) - however this is subject to private use restrictions - and in the case of rental property it is likely that the business useage of the equipment is extremely limited! Ordinarily landlords do not bother to claim capital allowances as the allowance and tax saving isn't worth the time and effort in calculating the business element of the capital allowance.

For example, if you buy a drill for use in the business for say £100. Each year that drill would attract a Capital Allowance deduction of 25%, so in year one, the Capital Allowance would be £25, and the balance of value to carry forward to the following year would be £75. The second year the allowance would be 25% of £75, being £18.75, and so on and so forth. However of the capital allowance of £25 (or whatever it would be for the year in question), you can only claim a proportion of this against your profits relating to business useage. In reality most tools are used more personally than for a few jobs at a rental property and therefore it is likely that the equipment is used only a small percentage in the rental business, so the claim would probably be quite minimal. So in the case of my example, a capital allowance of £25, at say 50% business use (which could be pushing it!), would mean a deduction of £12.50 from your profits, meaning a tax saving of £5.... for all that computational work!! The tool is written down by the whole £25, not just the business element you claim against your profits.

As most equipment has duality of purpose, each piece of equipment would be subject to a private use adjustment individual to that tool (as one tool is unlikely to be used for exactly the same amount of time in the rental business over the useful life of that equipment as another piece of equipment - usually!), which means that each of those tools would need to be listed separately in individual capital allowance computations, instead of forming part of a 'General Pool', and each capital allowance would then be adjusted accordingly.

Additionally, at the point that that equipment is no longer used in the rental business, it must be removed at it's market value and a Balancing Allowance (if the written down value of the tool is higher than the market value) or Balancing Charge (if the written down value is lower than the market value), adjusted for private use, would increase or reduce the profits accordingly.

Ordinarily I would say 'claim whatever you can!', but in the case of capital allowances on residential accomodation it may well not be worth the effort.

Simon is right, if your property is furnished then wear and tear allowance (calculated as 10% of the total rental profits, less council tax and water rates paid by you = Total x 10% = deduction) will be allowed as a deduction from your rental income.

Additionally repairs (as long as they are not improvements) are also allowable.

In the case of your £600 tool, then a capital allowance in the first year of £150 would be available (apportioned if the rental business did not start until after 6 April), however, if you intend to keep this tool and use it personally then only an element of that £150 can be claimed as a deduction against the rental profit, and once you no longer use it in your rental business, it must be removed at market value and the necessary adjustments to your profits made.

If you would like, I am happy to email you a copy of my Residential Lettings fact sheet which covers the types of expenses you can claim, and has detailed explanation of repairs, wear and tear allowance and mortgage interest - all of which seem to be issues which frequently arise on the forum. If you would like a copy, please email me on sherena.glanton@horwath.co.uk and I would be happy to email a copy to you.

I hope this clarifies the position - I should have detailed this more clearly in the first place.

Regards

Sherena Glanton CTA