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Wear & Tear vs Replacement relief after April 2013 - change?

Wear & Tear vs Replacement relief after April...

It's been the case that landlords letting furnished property could claim either the 10% wear and tear allowance, or the replacement relief, which I know is a concession by HMRC. I'm also aware that:

"Whatever basis is chosen must be followed consistently. It isn’t possible to chop and change between the wear and tear allowance and the renewals allowance from year to year."

Fine. Always stuck to that, however Nichola Ross Martin recently wrote an article saying that HMRC are withdrawing the replacement relief from April 2013. That being the case, a taxpayer previously using this method MUST now "chop and change".

That being the case, can we do it now in 2012 if we know the other method is effectively defunct?

Any idea?

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23rd Jan 2013 17:21

Maybe...

...Ms Ross Martin had seen this thread.  You can indeed chop and change since 2011/12.

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08th Feb 2013 14:02

Someone is not reading the question perhaps?

George please note that quoted wording above comes from HMRC's manual not me www.hmrc.gov.uk/manuals/pimmanual/pim3200.htm

In response to the query - yes, HMRC are withdrawing their concession so you may have to change your claim. 

In passing, you can even claim the renewals basis on fixtures as well as the wear and tear allowance in the same year. HMRC's past position was that if you have claimed the wear and tear allowance on a asset you cannot also then claim a replacement cost of it the next year - that seems fair, although pretty hard to keep track of assets and impossible to police unless you keep an accurate fixed asset schedule - I wonder how many lettings ever do.

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

 

 

 

 

 

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08th Feb 2013 14:17

Balls-derdash!

Actually Nichola the part of the OP's post I was referring to was:

norstar wrote:

Nichola Ross Martin recently wrote an article saying that HMRC are withdrawing the replacement relief from April 2013. That being the case, a taxpayer previously using this method MUST now "chop and change".

What's troubling me now though, is:

Nichola Ross Martin wrote:

In passing, you can even claim the renewals basis on fixtures as well as the wear and tear allowance in the same year

S.308C(b) ITTOIA 2005 disagrees with you.

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08th Feb 2013 14:38

Eye problems?

Noting the difference here between"fixtures" and furniture.

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08th Feb 2013 14:51

Nichola

Since fixtures are neither mentioned in S.68 (replacements of implements, utensils or articles) nor S.308(1)(b) (furniture replacements), one has to assume that they are one or the other before relief for replacement expenditure can be obtained in the first place.

Since S.308C(2)(b) is clear that relief cannot be obtained under either section in a year in which a wear and tear election is made, it seems clear that there's nothing a fault with my eyes.

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08th Feb 2013 15:40

"one has to assume..."

you make your assumption!

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08th Feb 2013 16:06

I know there were a lot of words to grasp...

... but now read the rest of the sentence.

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08th Feb 2013 16:26

OK, put you out of your misery

"Furnished" lettings means that the landlord is supplying furniture, and hence the wear and tear allowance which gives you relief when otherwise you would not be able to obtain capital allowances on furniture. Being a premises your house or whatever will also have some fixed fixtures. Following basic rules + case law you may claim expenditure on repairs and renewals (aka replacement), irrespective of s308.

See also the link to HMRC's manual above.

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08th Feb 2013 16:49

No!

PIM3200 refers to the non-statutory renewals basis, which will no longer apply 2013/14.

You can get relief for repairs, yes. As in Hinton v Maden & Ireland.

Replacement of furniture is within S.308(1)(b)  and (capital) replacement of fixtures is statutorily provided by S.68 (as implements, utensils or articles).

Both S.308(1)(b) and S.68 are precluded from applying by S.308C(b).

You can't claim relief for capital expenditure (via S.68/S.308(1)(b)) in a year for which you've made a wear and tear election.

My only misery is that you insist on perpetuating your piffle.

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09th Feb 2013 11:03

Sad for the forum

you hide behind a pseudonym and then are always extremely rude to me.

 

 

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09th Feb 2013 11:21

Exaggeration

I'm not extremely rude to you at all. And besides, it's not just you, I'm an equal opportunities misanthropist.

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09th Feb 2013 11:55

Help for anyone who is confused

Don't shoot this messenger, although I have detailed guides on this on my website readers might like to note HMRC’s take on the rules, as showing in its 2011/12 Property tax toolkit.

This is the latest one available, at the time of writing, and the significance is that if you have followed HMRC's advice you will not get a penalty.

"18. If Wear and Tear Allowance has been claimed has it been calculated correctly?

Risk

When letting residential furnished property (excluding furnished holiday lettings), plant and machinery capital allowances cannot be claimed on furniture, furnishings or fixtures within the property. Instead a deduction can be claimed for Wear and Tear Allowance or Renewals Allowance.

Wear and Tear Allowance is equal to 10 per cent of the net rents after deducting charges or services that a tenant will usually bear but which are in fact borne by the landlord, for example council tax, water rates etc. Renewals Allowance is the net cost of replacing a particular item of furniture etc, but not the cost of the original purchase.

Where the proprietor also lets unfurnished property Wear and Tear Allowance should be calculated on only the net rents from the furnished property.

Mitigation

Wear and Tear Allowance is not available where the property is treated as furnished holiday lettings because plant and machinery capital allowances may be claimed as if the activity were a trade.

Ensure that the costs of replacing plant and machinery within the rental property have not been claimed separately in addition to Wear and Tear Allowance.

Establish whether rental income is being received from any unfurnished lettings or from partly furnished accommodation. If so, ensure that this income is excluded when calculating the Wear and Tear Allowance.

Explanation

The cost of replacing plant and machinery supplied with the property, Renewals Allowance, can be claimed as an expense where neither the Wear and Tear Allowance nor plant and machinery capital allowances are claimed.

Whether Wear and Tear Allowance or Renewals Allowance is used it must be followed consistently - it is not possible to alternate between these allowances from year to year.

However, in addition to the Wear and Tear Allowance, a business can also deduct the net cost of renewing or repairing fixtures that are an integral part of the buildings. The net cost means the cost of the replacement less any amount received for the old item.

For further guidance see PIM3200. "

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09th Feb 2013 12:12

Yes but

HMRC Toolkit wrote:

However, in addition to the Wear and Tear Allowance, a business can also deduct the net cost of renewing or repairing fixtures that are an integral part of the buildings.

That's always been the case. The building is the entirety, and replacing such a fixture (with no appreciable degree of improvement) is (and has always been) a repair to the building.  That's referred to in PIM3200 and nothing has changed there.

That's in contrast to your statement:

Nichola Ross Martin wrote:

In passing, you can even claim the renewals basis on fixtures as well as the wear and tear allowance in the same year. HMRC's past position was that if you have claimed the wear and tear allowance on a asset you cannot also then claim a replacement cost of it the next year

Which was suggesting you had some new light, in order to farm people on to your website.

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11th Feb 2013 12:02

Pseud - so you were wrong then

If you revealed your identity I could email you the condocs and guidance, for sure the information is all on my site, but I think you have allowed red mist to settle in.

If anything I have been bringing "a new light" for you. You have amply revealed that you did not read the con docs and so you seem to have extended the meaning of s308C.

I appreciate that everyone would like everything to be free on the internet, but some of us are engaged in the provision of information and that all takes a lot of time for which we need to earn a living. In actual fact the answer to this question is available on my website all the time but I have agreed with the editors of Aweb that it is not in the spirit of the forum and do straight links, although I think in this case because there was actuallly a reference to me that would have made life a lot easer. In any event the original questioner was actually talking about two things, but did not realise it, so actually I would have to link to two parts to explain fully and following the link to the other discussion where I can see some confussion going on, but it is not my place to clean up misunderstandings in a long thread of that nature - I just don't have time and its not my job any more.

Ironically who ever the questioner was could have just emailed me for an explanation - perhaps they will next time.

So my tip to you is that you read the con' docs, you will then see what concession is intended to be withdrawn in April 2013 and importantly note HMRC's interpretation of this, which differs significantly from your own. Hence my link to HMRC's helpsheet (and not my site).

In passing I have also found answers to this on sites other than my own, but they are all paid links.

 

 

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11th Feb 2013 13:12

Yawn!

Yes Nichola. I'm aware of THIS document and THIS document and THIS document.

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By norstar
11th Feb 2013 12:19

So in short...

You can chop and change. That was easy!

Nicola, only didn't email you direct as I've used this forum as an exchange of information to help fellow practitioners as a sort of "community" thing, rather than to simply email someone in a one-way request for information, for which I'm not paying them for their time. I always feel guilty in doing so, whereas if I'm answering someone else's post and then mine gets answered, I don't!

 

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11th Feb 2013 13:20

Norstar

No, not that easy. Not with all expenditure - hence my objection with the first posting! All misleading.

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11th Feb 2013 13:45

Ah so...

... it's not the case that you now elect for W&T on a year by year basis? and that:

if you don't so elect, you can claim renewals (on a statutory basis)if you do so elect, you cant?

Because that's what the legislation plainly says.

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11th Feb 2013 13:58

except that

you did not read those articles that you have found the links to have you?

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11th Feb 2013 14:37

Oh but I did!

And would you expect our tribunals and courts to enforce the legislation that has been enacted? or some minor assertions (that incidentally, I don't take to mean what you seem to take them to mean) of HMRC in a consultation when they first drafted the legislation and failed to include a provision giving effect to those assertions?

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12th Feb 2013 09:27

Pseud,

I am not unreasonable, if you posted under a real name and were not so rude I would send you over what you are missing.

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12th Feb 2013 10:18

What I'm missing?

You mean what you think I'm missing.

You're referring to the part of the original consultation, introducing the proposed Ss308A-C, where HMRC say:

"The wear and tear allowance may not be claimed if a deduction has been claimed for the replacement and alteration of trade tools or expenses incurred in connection with the provision of furniture."

You think that that means that once you've claimed for a replacement, you can't at any time subsequently claim wear and tear allowance.

BUT the legislation says no such thing.

On the other hand I think that it simply means that you can't claim renewals and wear and tear in the same year.

THAT IS what the legislation says.

And by the way, you're confusing being rude with not suffering fools gladly.

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12th Feb 2013 10:29

Pseud

I repeat my comment above.

Who are you?

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12th Feb 2013 11:48

Banana hammock!

Sorry, I just had to relieve the tension...

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12th Feb 2013 12:52

Eh?

Relive what?

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By norstar
13th Feb 2013 11:31

Dear god, I think I'll shoot myself. Ever ask a question and regret it!

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08th Aug 2013 12:39

Fridge in an unfurnished property?

Can anyone tell me yes or no whether you can claim for the cost of a new standalone fridge in an unfurnished property for 2013/14?

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By Kmanu
22nd Feb 2014 20:04

Can you claim for replacement of windows and doors??

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