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Delapidations

I have a client with a sizeable rental property portfolio. I realise that you would normally include a Delapidations provision when you ar the lessee and not the lessor, however, my client has an obligation to keep the properties in a reasonable state of repair as lessor and so would it be reasonable to include a provision?

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13th Feb 2012 10:43

No

Specifiically not allowable

 

Provisions for repairs to premises

A taxpayer can deduct expenditure on repairs where the liability to pay for the work is incurred during the tax year but payment has not been made by 5 April. But a provision for repairs to premises that they propose to incur in the future is not deductible. For example, they can’t claim a deduction for repair work they think will need doing next year but which they have not yet incurred any liability to pay.

 

PIM 2020

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13th Feb 2012 10:53

@Cloudcounter

I think PIM2020 is just referring to normal accounting treatment.  A rental business should be treated like a normal trade in accordance with UK GAAP, and therefore if the accounting treatment supports a provision (i.e. present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity) then it would be allowable for tax purposes, provided it was not capital in nature.

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By khalm0
13th Feb 2012 16:59

Agree with above.

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