Getting ready to let out a home

Getting ready to let out a home

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This is another revenue vs capital query, this time on doing up a home rather than newly purchased but-to-let.

Client moved out to live with a new partner and updated a tired fitted kitchen, rewired, re plastered, re carpeted etc at a cost well in excess of £20k before letting unfurnished. So no doubt it was a significant amount which raises a flag, but the property was perfectly habitable just not especially attractive tenants.

Often significant refurb expenditure prior to letting for the first time is treated as capital (Law Shipping). I'm sure this will be HMRC's initial assumption and it seems to be the prevalent 'advice' out there.

PIM2505 allows pre-letting expenditure to be deductible if it would have been so after the letting business commenced.

Have forum members had success with the view that rewiring, plastering, replacing fitted kitchen with similar etc be treated as delayed but ongoing maintenance of a functioning asset rather than as improvement/making fit for rental business?

As an associated thought, I'd hope the mortgage interest incurred during the refurbishment period was deductible as if on the first date of letting?

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By JimH
08th Aug 2014 23:25

Still hoping for help on this

... please

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By JimH
14th Aug 2014 08:09

Type of refurb expenditure for revenue/capital decision
Thank you for your help, Basil, detailed and well considered as ever. And I may re-consider further back-dating the finance cost deduction to date of leaving the property rather than start of works.

With regard to the kitchen, I imagine new integrated white goods need to replace similar to be allowable. So I should rule out first time purchases or replacements required for electrical safety reasons before I can be sure of revenue treatment. What about an integrated appliance replacing existing freestanding?

For replacement carpets, if expenditure pre-dates removal of the concessionary treatment which then applied, am I on safer ground claiming revenue treatment? I believe Odeon Cinemas covers this.

Regarding the 'etc' spend:
- for new fire doors, I believe these are making fit to let and capital
- levelling and re-tiling floors and replacing dated lighting with modern spot-lights - probably all capital unless floor levelling purely repair
- for major garden overhaul without significant replanting, I think all revenue including replacement fencing unless building a first time patio
- and I believe I need to apportion the re plastering and decorating for walls that have undergone small structural change to exclude an element attributable to capital spend

I welcome discussion on the less clear-cut areas or to correct my thinking.

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By JimH
14th Aug 2014 07:41

Some help on capital revenue decision
In older thread https://www.accountingweb.co.uk/anyanswers/question/how-does-flooringwal...

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By JimH
15th Aug 2014 12:23

@Basil thank you

Great to have a second opinion. Very helpful, thanks.

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