Capital or Expenses ?

Have re read PIM1900/3010 etc and am erring on the side of repairs !

Didn't find your answer?

Client with a FHL (2020 income of circa £30/40k) had to "repair" the driveway up to the property as it was in a dangerous condition, which cost £17,400, is it expenditure or capital.

The FHL consists of  a main house (25% part occupied by the H & W partnership) and several cottages solely rented out.

There was no improvement to the drive and it was a like for like "repair".

Any helpful/useful thoughts would be greatly appreciated.

Replies (12)

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paddle steamer
By DJKL
17th Nov 2020 13:37

What condition was the drive in when the FHL business started? (Is the FHL business recent or longstanding)

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Replying to DJKL:
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By meadowsaw227
17th Nov 2020 14:07

Hi DJKL,
It has been a FHL since 2002, no expenditure on driveway until now.
The driveway posed a hazard to walkers and cars
I stayed there a couple of times several years ago and the drive was not too bad then .Some bad winters have made it deteriorate.

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Replying to meadowsaw227:
paddle steamer
By DJKL
17th Nov 2020 14:39

Repair for me with obviously some sort of equitable allocation for the part of the house in which they live.

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Replying to DJKL:
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By Anonymous.
17th Nov 2020 15:12

DJKL wrote:

Repair for me with obviously some sort of equitable allocation for the part of the house in which they live.

Agreed - the "private" adjustment is important not to forget.

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Replying to DJKL:
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By meadowsaw227
17th Nov 2020 15:41

Thanks DJKL - I was thinking along the same lines.

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Replying to meadowsaw227:
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By Tax Dragon
17th Nov 2020 17:21

That's what I'd do too - a) the expenditure seems plainly revenue and b) it's plainly just and reasonable to allow a business proportion.

However, were I HMRC, I would be looking at BIM, eg ¶37007, and asking you what identifiable part of the expenditure was W&E incurred for business use.

Incidentally, you mention that H&W have a separate partnership. I've stayed at places like that, where you walk and drive up the same track as the milk tankers or whatever. Can an expense be W&E for two businesses? Again, I'd likely claim some and some in reality, coz that's only fair, but tax law is not always as understanding.

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By Piltdown Man
17th Nov 2020 14:00
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Replying to Piltdown Man:
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By meadowsaw227
17th Nov 2020 14:11

I persevered right to the bottom .
Thanks Piltdown Man.

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Replying to richard thomas:
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By meadowsaw227
17th Nov 2020 15:40

RT - thanks an interesting read .

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Replying to richard thomas:
By cfield
18th Nov 2020 11:30

This case proves 2 things about HMRC. Firstly, that they clearly don't bother studying the cases they use as evidence at tribunals and often rely on cases that bear little or no resemblance to the one under appeal. I've noticed this myself in Schedule 55 cases where they routinely cut and paste Donaldson into their letters, regardless of whether or not it is particularly relevant.

Secondly, they quite obviously "try it on" in cases they have little or no hope of winning. Any fool could have seen that Steadfast was clearly maintenance, not improvement. Even their own reviewing officer said that the new surface did nothing more than the old one. Yet still they went ahead, blatantly trying to bully the taxpayer into submission when they must have known they didn't have a leg to stand on, wasting taxpayers money in the process.

I suppose it's a bit like Donald Trump refusing to respect the election result. Some people just can't take losing. Personalities and emotions start getting in the way and the HMRC officers want to fight to the bitter end. No skin off their noses of course. They'll still get their full salaries, win or lose. It might be a different matter if they or their bosses were surcharged for bringing hopeless cases.

Perhaps HMRC should be taken to court as a vexatious litigant by some brave Attorney General. Let's start a petition for this to happen on the Gov.UK website and get 10,000 signatures. At least it will raise awareness, bring their behaviour into the open and start a public discussion.

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Replying to cfield:
paddle steamer
By DJKL
18th Nov 2020 11:38

HMRC are akin to those who have pursued legal disputes supported by legal aid against those that had to defend their rights from their own pockets- we once had a title dispute in which we were tangentially involved, £8k of fees because the other side kept hammering away (without merit) at the taxpayer's expense.

HMRC would be somewhat less keen if those in HMRC who decided to proceed had their success ratio considered vis a vis their own job security.

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