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What are 'improvements' for tax purposes?


joparish

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Over the past two years I have completely renovated two rental properties which I own. The work has included the complete renewal of ceilings, plastering, plumbing, electrics, bathrooms and kitchens. The question is, can I claim anything as an allowance against tax, or are these works strictly improvements, as opposed to repairs/maintenance and thus not allowable?

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In order to answer your questions I need to know....... Did you buy the properties in a dilapidated condition with the intention to renovate before letting them OR did you already own them, were already letting them and decided to renovate before reletting ?

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The latter - they were already owned, with long term, sitting tenants who either passed away or moved into sheltered accommodation. The properties were then renovated to make them ready for the short term letting market. quote name='Richlist' timestamp='1327065263' post='18290']

In order to answer your questions I need to know....... Did you buy the properties in a dilapidated condition with the intention to renovate before letting them OR did you already own them, were already letting them and decided to renovate before reletting ?

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Over the past two years I have completely renovated two rental properties which I own. The work has included the complete renewal of ceilings, plastering, plumbing, electrics, bathrooms and kitchens. The question is, can I claim anything as an allowance against tax, or are these works strictly improvements, as opposed to repairs/maintenance and thus not allowable?

I'm afraid it is still quite complex.

If you were already letting the property then it depends on the detail of the renovation work. If you replaced an old kitchen or an old bathroom suite with a modern equivalent without any upgrade then you can normally claim the cost as reveuue and offset against rental income. However, as soon as there is an element of improvement or other associated structural work then, the whole job becomes capital in nature and the costs can only be used to offset future CGT on disposal.

Only you know the nature of the work but I suspect it is all capital expenditure.

If you think there's a chance of claiming some as revenue it might be worth having an accountant look over the detail.

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Thanks for this. I think it will all fall under the capital expenditure definition as the places were pretty poor and the work definitely improved them by bringing them up to date with everything either renewed or renovated and completely redecorated, etc but thought it was worth asking. Thanks again.

Over the past two years I have completely renovated two rental properties which I own. The work has included the complete renewal of ceilings, plastering, plumbing, electrics, bathrooms and kitchens. The question is, can I claim anything as an allowance against tax, or are these works strictly improvements, as opposed to repairs/maintenance and thus not allowable?

I'm afraid it is still quite complex.

If you were already letting the property then it depends on the detail of the renovation work. If you replaced an old kitchen or an old bathroom suite with a modern equivalent without any upgrade then you can normally claim the cost as reveuue and offset against rental income. However, as soon as there is an element of improvement or other associated structural work then, the whole job becomes capital in nature and the costs can only be used to offset future CGT on disposal.

Only you know the nature of the work but I suspect it is all capital expenditure.

If you think there's a chance of claiming some as revenue it might be worth having an accountant look over the detail.

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