Whatever your belief about Christmas a good proportion of the UK turns off for a couple of weeks over Christmas. It’s quite hard to get anything done if you need to.
Nursing a rapidly developing cold I left the office hopeful to shake it off in time to enjoy Christmas Dinner. Just as I was coming round on Christmas Eve we got the message all landlords dread. Boiler issues! Yep a tenant had lost heat and hot water.
Cue the desperate texting and calling gas engineers to see which are working and whether they can squeeze one last job in. Luckily we managed to get someone out and it didn’t cost the earth (our usual guy was working but just didn’t see his phone while knee deep in another job).
This brings me to think of how many times people get their taxes wrong on what for most is one of their biggest costs categories. Repairs.
The general rule is that maintaining a property is always going to be an allowable expense and I doubt there are any of you that would not claim the expense for a boiler repair. It does get a little less clear as you move away from the obvious though. I’ll save a discussion on capital vs revenue costs for another time but for now I’ll cover off repair costs that happen before you even rent a property out. This is an area where a lot of people don’t know they can claim.
HMRC own’s property rental toolkit covers this off pretty well but most haven’t seen it.
Question 7 of the toolkit covers off repair costs generally and question 9 covers off works prior to rental.
The key extract is here:
“Repairs to reinstate a worn or dilapidated asset are usually deductible as revenue expenditure. The fact that the taxpayer bought the asset not long before the repairs are made does not in itself make the repair a capital expense. But a change of ownership combined with one or more additional factors may mean the expenditure is capital.
Examples of such factors are:
· A property acquired that was not in a fit state for use in the business until the repairs had been carried out or that could not continue to be let without repairs being made shortly after acquisition
· The price paid for the property was substantially reduced because of its dilapidated state, except where the purchase price merely reflects the reduced value of the asset due to normal wear and tear (for example, between normal exterior painting cycles).
· The landlord makes an agreement that commits them to reinstate the property to a good state of repair.”
For most properties that have been occupied prior to purchase they are probably in a fit state for use (even if not particularly attractive) and if so then the majority of works will be an allowable expense.
Kitchen and bathroom replacements will be an allowable deduction so long as what you put in is essentially the same as what you take out. Now this doesn’t mean you need to find a green bathroom suite it just means that if there was a bath, sink and toilet they should be replaced with a bath, sink and toilet. Same goes with the kitchen. If there was a fitted kitchen in there before you started and afterwards there is basically the same you will be good.
Normal rules apply mind so if you start splitting rooms and going in to the loft etc that is a capital cost not revenue.