Cut off point for change from furnished to unfurnished letting

Cut off point for change from furnished to...

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A buy to let property was furnished and subject to wear & tear allowance.     In February there was water damage caused by a leak from the flat above, which made it necessary for the tenants to vacate and at the same time they surrendered their tenancy.

A major refurbishment then took place (both dealing with the flat generally and the water damage) and prior to which it was decided to remove all furniture with a view to letting the flat unfurnished.      The landlord had loss of rent insurance cover - the basis for calculating this was the rent charge in the (furnished) tenancy agreement.   

The refurbishment included replacing several items which would be disallowed if wear & tear allowance was being claimed.  However at what point did the property cease to be a furnished letting and become an unfurnished letting?  (from which point those replacement items would be allowable).

I have received advice from a tax advice line that it became unfurnished at a point in time after the tenant left when the decision was made to let it unfurnished.    Just wondered if anyone has any thoughts on this or experience of similar situations.

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By Paul Soper
11th Jun 2013 16:31

Replacements...

There is no statutory definition of the difference between furnished and unfurnished, there used to be case law in the days of rent controls when unfurnished gave considerable statutory protection to tenants.  I seem to remember that in one property law case on this issue Lord Denning expressed the opinion that only if the furniture had a value equal to a year's rent (remember this was the time of rent controls and fair rents which were much less than a market rent) could it be regarded as furnished.  On that basis the dcision to let unfurnished is probably a reasonable time to consider.  However the property will still be residential and capital allowances will still be prohibited - replacements would normally be capital expenditure and disallowed anyway surely? 

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By David_Lewis
11th Jun 2013 18:45

Thanks

Paul

Thanks very much for your reply.  The HMRC web site says "A furnished property is one that is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc."  I don't know what the basis for this is, but it sounds reasonable at least in layman's terms.

I'm not sure it changes the conclusion, but thought it may be of interest.

 

  

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By Paul Soper
11th Jun 2013 19:13

re "furnished"

I'd guess that the HMRC suggestion is as good as any, Lord Denning was commenting at a time when landlords would provide a very, very poor standard of furnishing to avoid rent controls.   These days it is quite common for tenants to have some items of furniture which they prefer to the landlord's own so many lets are probably more accurately called 'semi-furnished'!  Yet another example of our taxation rules only making sense in an historical context...

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