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Rental properties - allowable expenses

Happy New Year to all. Is it just me or is it hard to get going after the Xmas break? Can someone confirm for me please. A furnished rental property had a new kitchen fitted during the year - all expenditure wrt the new kitchen including plastering is capital and therefore not deductible against rental income?

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Another rental property query - where a furnished property claims 10% W&T allowance, would cover the purchase of new carpets in the property?

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Capital allowances will be due on the cost of the kitchen.

 

I presume your next post is a futher question.The 10% is in respect of soft furnishings and so includes carpets but this allowance is only due when the property is fully furnished otherwise the replacement cost of carpets can be claimed.

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mmm...

couple of things-

 

firstly -  you can't generally claim CA's on a residential property.

 

secondly - it is likely to be accepted that the kitchen is a repair and allowable in full.

 

for repairs

http://www.hmrc.gov.uk/manuals/pimmanual/pim2020.htm

 

for W&T

http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm

 

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yes you can

note new kitchen---you are wrong on cas

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from the horses mouth.  HMRC

dont think so.

from the horses mouth.  HMRC manual.

Even if the repairs are substantial, that does not of itself make them capital for tax purposes, provided the character of the asset remains unchanged. For example, if a fitted kitchen is refurbished the type of work carried out might include the stripping out and replacement of base units, wall units, sink etc., re-tiling, work top replacement, repairs to floor coverings and associated re-plastering and re-wiring. Provided the kitchen is replaced with a similar standard kitchen then this is a repair and the expenditure is allowable.

 

I have assumed a like for like replacement in the absence of other info to the contrary.

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exactly---NEW

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the only restriction is on a claim to cas where the 10% w & t allowance is claimed but would a fitted kitchen not be classified as plant and machinery

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I agree with blok

I'd suggest that the OP is using the word "new" as a colloquial alternative to the word "replacement".

S.35 CAA 2001 specifically excludes expenditure on plant and machinery "for use in a dwelling house" from qualifying for CAs.  The only situation when CAs could be claimed for residential accommodation is if the property is an HMO and the kitchen is a common part (but even then I've got a vague recollection it may be precluded under the Business Brief on the subject - I don't have it to hand).

Provided the kitchen is being replaced and isn't truly "new", relief could still be obtained (despite an element of improvement) in full by adopting the non-statutory renewals basis.  See BIM46935.

With respect to the carpet point, this might also very well be a repair, rather than the replacement of furniture.  Odeon Cinemas is remembered for its more consequential aspects, but the expenditure involved related predominantly to carpeting.

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.

please refrain from posting short abbreviated answers where it is not clear what you mean. 

It's ok to have a different opinion, but please articulate your opinion in a full manner that is helpful for everyone to gauge where it is you are coming from.

 

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Clarification

I understood the question to mean an expensive fitted kitchen costing over £5000 to substantially improved the present kitchen,.In this case cas would be due as it would not be covered by the w & T allowance.

 

Does that help?

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.

The W&T allowance is irrelevant in repect of the kitchen.

and

As Steve mentions above there are generally ZERO CA's on items contained within a residential property.

 

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exactly.section 35 assumes W&t will be claaimed and if not cas can be claimed

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@uktaxpal

I know that you're averse to simply accepting HMRC's word, but please can I ask that you take the time to read both PIM3200 to which blok has already referred and BB45/10, as what you're saying simply isn't correct.

Essentially, no CAs on kitchens in residential buildings in pretty much any circumstances (not even an HMO sitution - see the Business Brief).

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that assumes w&t can be

that assumes w&t can be claimed

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W&T not relevant for structure repairs.

uktaxpal wrote:

that assumes w&t can be claimed

Fitted kitchens are not furnishings. Replacing a fitted kitchen (and any integrated appliances) on a like-for-like basis is a repair to the entirety that is the structure and is allowable regardless of the basis chosen for handling replacements of furnishings.

HMRC have regarded all floor coverings as furnishings but seem to be softening in their approach with regard to laminates that aren't simply click-fitted but are permanently attached to the structure.

 

 

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I am so glad I asked those questions as I just assumed it was no to both. I will check out the HMRC manuals for clarification and then can put them on the file. My question was vague in that I called it a new kitchen but it was a really a replacement, revamp of cupboards worktops sink etc. Still not certain about the carpets HMRC says that 10% W&T does cover carpets so does not look like it is allowable.

One more question to the pile, what about if the owner has to pay to extend their lease, would this expense be of a capital nature and therefore deducted when the house is sold and CGT becomes liable?

Once again thank you all for comments and tips.

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To re-iterate my position is:in the case of a substantially improved  fitted kitchen capital allowances will be due because the wear and tear allowance does not include such items.

If we were talking like for like replacement it would be a pointless question because the cost would be revenue obviously.

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in the case of FURNISHED lettings the wear and tear allowance includes carpets.

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Lease extension is CGT as in theory the lease becomes more valuable after the lease is extended unless there are other unusual circumstances.

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No CA's on P&M in let dwelling house

To re-iterate my position is:in the case of a substantially improved  fitted kitchen capital allowances will be due because the wear and tear allowance does not include such itemsTo re-iterate my position is:in the case of a substantially improved  fitted kitchen capital allowances will be due because the wear and tear allowance does not include such items

 

No Cap Alls are available on P&M let for use in a dwelling house...

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lease extension-see concession d39

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APOLOGIES ACCEPTED HERE or payment acepted in cream cakes toffee and banana or raspberry bulee chesscake and double cream--lovely jublee

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is it just me ...

but your links appear to prove you're wrong uktaxpal !

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is a fitted kitchen furniture?

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No

uktaxpal wrote:

is a fitted kitchen furniture?

 

No. What is the point of asking this again ? It is covered several times above. The answers and the links posted seem clear, in general for a residential letting no CAs for a NEW kitchen but renewal cost allowable for a replacement.

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@uktaxpal

Sorry, uktaxpal, but you can't get CAs on residential accommodation (except, in some restricted cases, on a house in multiple occupation). This is clearly spelt out in s35 CAA 2011 where it says:

35(2)  The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house.

I think that's pretty clear!

Cathy

[email protected]

 

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have the read the legislation

have you read the legislation?

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blood from a stone

If you want to make a specific point why don't you state exactly why you think the legislation supports it rather than cryptic comments and links to whole pages that appear to state the opposite to your case. My reading is that the legislation doesn't support CAs on a kitchen in a residential letting. Most of the posters above think that and have quoted text. If you are saying there is a case for such a claim it would be helpful if you said exactly what you are relying on so we can all learn from it.

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see section 248 caa 2001

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did you mean this ?

uktaxpal wrote:

see section 248 caa 2001

248 Ordinary Schedule A businesses

If the qualifying activity of a person who is entitled or liable to an allowance or charge for a chargeable period is an ordinary Schedule A business, the allowance or charge is to be given effect in calculating the profits of that business, by treating—

(a) the allowance as an expense of that business, and
(b) the charge as a receipt of that business
.
 

I don't see the relevance. This simply says if you are entitled to a CA then treat it as an expense. But in this case it seems a CA is not due !

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sorry Cathy...

we seem to be typing in tandem :)

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Let's not fight!

Come on folks - let's not start the new year with a fight!

I'm afraid s248 doesn't help your argument, uktaxpal, as it says 'person who is entitled ... to an allowance' and clearly there is no entitlement to capital allowances due to s35 CAA 2001 (not 2011 as I inadvertently typed above!).

If, however, you have had any success arguing this with HMRC (as opposed to making uncontested claims), I'm sure we would all like to hear more about it.

Cathy

[email protected]

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@gerrysims

We'd better be careful, Gerry, or people will think we are the same person!!

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I do agree with uktaxpal...

... with respect to the lease extension point. :)

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Steve,  I struggle to see

Steve,  I struggle to see what a lease extension got to do with the question?  if you throw enough darts you will hit the board at some point... it's like saying 2+2 is 5 and then correcting it by saying OK how about 3+2 then?..Steve you are one of the most knowlegable people on here and if someone dismisses what you say without any justifiable reason then I would personally leave them to it.

Gerry/SteveM?, the legislation says you cant claim allowances.  IMHO there is nothing left to discuss.  Dont be taken in with some cut and paste jobs which prove absolutely nothing and we shouldn't confuse persistance with accuracy.  Again your practical experience and is immense, I would trust your gut instincts.

 

I'm done with this now...

cheers

 

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Quick Note

In response to a number of reports, I've had to step in and moderate some of the comments in this thread. While we always want to encourage healthy debate, please be sure to keep any submissions as professional and civil in tone as possible.

Thanks.

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Appologies no cream cakes/cheescakes/double cream due.

 

section 35 caa 2001 excludes dwelling houses from pm cas.

 

Solution:lease expensive fitted kichens and re-finance those already purchased.

 

 

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hmrc view:Generally, if the replacement of a part of the ‘entirety’ is like-for-like or the nearest modern equivalent, we accept the expenditure is allowable revenue expenditure.

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"Solution:lease expensive fitted kichens and re-finance those already purchased".

I sincerley hope you are not serious!

 

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there is no claim to pma by lessee or lessor

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ok I agree it is a fantastic idea.

now, where can I find someone to hire me a new kitchen to replace the new kitchen I have just installed? anyone?

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Finance companies will always do a deal.

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The answer is...YES

You should be able to claim the cost of the renewal of these fixtures including plastering (that is a repair anyway).

Although s35 CAA 2001 does not allow a claim for capital allowances in a let dwelling house, the property is furnished and so the 10% wear and tear allowances is claimed and therefore HMRC will permit a claim for replacement cost of fixtures.

Strange but true, and if you look at repairs and renewals case law - Odeon Cinemas - etc this sort of claim may well be possible under the general case law on repairs. However, HMRC intimates in its manuals that it operates this as a concession. Replacement is also allowed under s68 ITTOIA 2005 - replacement of tools etc.

I have detailed guidance on this on my site on this very topic and more. Note that this guidance does not apply for FHLs - they of course may claim allowances on fixtures - only at the lower rate though and that is another story.

Virtual Tax Support for accountants: www.rossmartin.co.uk

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Nichola

I think the party was last week! Can you switch off the lights when you're done taking down the decorations?

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Sorry George

Your comment is lost on me...

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What a night...

Have a look in the oven.

I hid 3 cans of Strongbow there.

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Nichola

You really can't blame me for your misplacement!

And please, don't apologise.  I'm actually rather warming to the idea of your being lost!

Enjoy mumpin's cider. Happy New Year!

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