Fitted Wardrobes....

[landlordman]

Hi

I am currently completing my tax return and have come across an issue. I have had fitted wardrobes installed in a rental property that have replaced old freestanding. Can I claim for the cost of the purchase as an integral part of the building?

[Melboy]

I think I am right in saying that you can only claim tax relief on fitted wardrobes when you come to sell the property as you have installed a permanent item.

Mel.

[landlordman]

I think I am right in saying that you can only claim tax relief on fitted wardrobes when you come to sell the property as you have installed a permanent item.

Mel.

Thank you for the quick reply

My query resulted after I read the HMRC notes where there was mention "fixtures integral to the building are those that are not normally removed by either tenant or owner if the property is vacated or sold".....

[Melboy]

That's correct. If you were to fit a new kitchen for your tenant, for example, you can only claim tax relief as a capital gain TAX (relief) on selling that property.

If you repair a kitchen with a tenant in place you may consider that as tax deductable expense on your annual tax return to HMRC.

Mel.

[Richlist]

The fitted wardrobes would be considered an improvement and therefore the cost can only be used to offset your capital gains tax when you sell. You should ensure you obtain a receipt for the full cost and keep it until you dispose of the property.

The fitted kitchen is not a good example.

If you replace a fitted kitchen, or for that matter a bathroom or carry out any type of repair/replacement that is the same layout & quality then provided the cost is not incurred on aquisition then it CAN be offset against income tax. Its only where there is an element of improvement to the property that it then becomes a CGT matter.

[Carryon Regardless]

I have considered that repairs that improve after the property has been a rental, that is not an acquisition expense, may be proportioned.

For example when I fitted UPVC double glazing to replace the expired rotten timber framed I claimed 50% as the annual expense against rental income profits,

and 50% have been applied to the capital account for allowance at disposal.

To digress a little, I also consider that improvements made on an empty property prior to it's sale, that is in preparation for the sale, are capital expenses,

Of course works between lets are offset against revenue.

[Richlist]

I have considered that repairs that improve after the property has been a rental, that is not an acquisition expense, may be proportioned.

My understanding is that proportioning is only acceptable when the repairs or maintenance costs form the bulk of the work. If they are an incidental part of a larger capital project then proportioning is not allowed and all costs should be treated as capital.

.....when I fitted UPVC double glazing to replace the expired rotten timber framed I claimed 50% as the annual expense against rental income profits,

and 50% have been applied to the capital account for allowance at disposal.

HMRC have accepted the cost of double glazed windows to replace single glazed windows as 100% revenue expense for a number of years now and so can therefore be offset against income tax.

[Melboy]

I always think it's best to contact HMRC direct and ask them what is and what is not allowable......or your accountant.

I got caught up in this single glazed window nonsense a few year back when you were only permitted to replace single glazed windows with the same. Nobody was actually making UPVc single glazed windows. I left the problem for a couple of years and the HMRC policy changed.

I asked HMRC if I were to replace single rotten wooden windows with new UPVc double glazed windows could I claim tax relief on the outlay for that tax year and the answer came back as Yes.

Now you can claim for all energy efficiency measures like roof void and cavity wall insulation that you take up to £1500 in any tax year without question.

Now as far as I know if you do put a new kitchen in ready for a tenant you cannot claim tax relief for it.

If you don't put a new kitchen in then tenants turn the place down as being unsuitable....catch 22.

Mel.

[Richlist]

Now as far as I know if you do put a new kitchen in ready for a tenant you cannot claim tax relief for it.

Thats not necessarily true as a stand alone statement. It depends on the circumstances & timing of the work.

Here are a couple of examples:

You could buy a property in good condition ready to let for say £200K OR you could buy a similar property for £150K that needed another £20K spent on a new kitchen, bathroom and central heating to bring it up to a suitable standard that could be let. In both cases all of the expenditure is treated the same......its capital expense NOT revenue.

Alternatively if you had been letting a property for a number of years and had a new like for like kitchen fitted. This would be a revenue expense and could be offset against IT.

[Melboy]

Having just bought and renovated a property.... replacing kitchen, bathroom and a load of other things as well I have been informed that I can only claim tax relief on major refits when I come to sell that property and not for the benefit of a future tenancy.

The replacement UPVc windows and EPC (additional loft insulation) then yes.... that's OK to claim tax relief for a prior tenancy.

Anyway all academic for me as far as I am concerned as I have sold the property last Friday so I shall claim for the tax reliefs against my annual Capital Gains tax allowance etc. when sold. I just give all the details and receipts to my accountant who sorts it all out for me and his modest fee for doing this is well worth the end result.

Mel.

[Richlist]

Many landlords (especially new ones) who should use an accountant, don't. Its really not surprising as the same ones often don't use an agent, don't follow the correct processes and don't know what they are doing.