New rules for furnished lettings

New rules for furnished lettings

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Now that replacements can no longer be claimed for what is HMRC's view on those clients whose property expenses were being claimed under the replacements regime.  Are we able to change the stance partway through the ownership to 10% W&T?  I know that that was never allowable, you chose one method and had to stick to it but surely now that the replacement option has disappeared, HMRC cannot object to W&T starting from 2013/14?  I haved a feeling I know what the answer is.  Is it HMRC sticking 2 fingers up to landlords?

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By WillowTree
05th Aug 2014 12:23

I can see lots of views but no answers!  This is something I geniunely need to know, has anyone got an opinion on whether HMRC accepts a change in stance due to their new rules?  Thank you for any input.

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By Semper Ubi Sub Ubi
05th Aug 2014 12:28

A subtle change to the rules that up to 5 April 2013 allows landlords, by concession, to claim a revenue deduction against rental income, where items that would qualify for capital allowances, are replaced. This concession is being withdrawn with effect from 6 April 2013 and will essentially affect landlords of unfurnished properties.

It is quite common that within unfurnished properties capital items such as white goods including cookers, fridges, washing machines etc. are provided by the landlord. These are items that can make a house habitable, but not enough to deem the property to be a furnished property.  Given the nature of these items it is possible that these are more likely to be replaced than repaired and it will be the replacement of these items that is going to cause a problem when the concession for claiming a deduction is no longer available from 6 April 2013.  It therefore follows that if these capital items are replaced after 6 April 2013, it will not be possible to claim a revenue deduction for the cost of the replacement. If however, the capital item is repaired a revenue deduction will still be permitted.

It is worth remembering that as well as the provision of capital items there will be items within a property that are fixed to the walls i.e. sinks, toilets, baths etc and a repair or replacement of these items (whether in a furnished or unfurnished property) should continue to be accepted as a revenue deduction after 6 April 2013, provided there is no element of improvement.  

In summary for landlords of unfurnished properties the allocation of expenditure between the cost of repairing an asset and the replacement an asset will be key to ensuring that they continue to maximise their revenue deductions.

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By WillowTree
05th Aug 2014 14:37

Thanks Semper Ubi Sub Ubi but I have seen this already.  It is the situation with furnished properties that are not yet on the W&T regime that I have a query with as preivously it has not been possible to change from replacements to W&T during ownership of a property.  Or have I missed the point?

 

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By rjoconnor81
05th Aug 2014 16:30

As far as I was aware there was nothing to stop you moving into the wear and tear allowance.  The only restriction was if you were in wear and tear you couldn't claim later for replacing the costs.  

 

The only rule that there is in place at the moment is that you need to elect for wear and tear on or before the first anniversary of the self assessment filing deadline and that all properties shoudl be treated the same, e.g. if you have two furnished properties then both should w&t or neither of them should be.

 

The link below is to HMRC manuals.

http://www.hmrc.gov.uk/manuals/pimmanual/pim3215.htm

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