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Landlord Claiming for Everything Under the Sun!

Landlord DIY Repair Enthusiast Small Tools & Other Whacky Expenses - Small Tools & Solar Lights etc.

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New personal client being investigated by HMRC for failure to disclose two residential lettings. I am currently preparing the income & expenditure accounts for the last 4 years for HMRC to scrutinise. Client has personally done plenty of repair work himself during the duration of the lettings (saving himself a small fortune in repair costs) and has passed the following through his books (most expenses are each less than £15):

Angle grinder (£20)

Circular saw (£30)

Drill bits (5 separate purchases of low value)

Drill hole gauge

Filling knife & wood scraper

Gardening tools

Hacksaw

Impact driver (£30)

Joint knife

Joint pliers

Kneeling mat (for low/floor repair work)

Ladder for painting (£30)

Paint brushes

Paint brush & pole (£10)

Paint edging roller (£15)

Radiator bleeding key

Pliers

Protective gloves for metal paint

Saw

Screwdriver (£25)

Screw organiser (£20)

Stanley knife

Tape measure (£10)

Wrecking bar for carpet etc. removal

External solar lights & replacement solar lights

I am tempted to disallow most of the above expenses apart from paint brushes, protective gloves and solar lights. However, the reality is that client would have paid lots more repair costs had he got a tradesman in to do the work.

It all seems unfair, but the new Replacement Domestic Items Relief seems to hammer the "Small Tools" allowance on the head.

I suspect client may be retaining most of the small tools for future work, but I need to ask him first.

Does anyone have any alternative views on this matter. Is there an element of subjectivity about all of this, or is it all a black and white issue.

Remember that HMRC will end up with full details of all client's expenses in this particular case!

 

 

Replies (40)

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By frankfx
21st Jan 2021 20:14

Four candles are missing!

Thanks (5)
Replying to frankfx:
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By Paul Crowley
21st Jan 2021 20:22

And Os

Thanks (1)
Replying to frankfx:
A Putey FACA
By Arthur Putey
22nd Jan 2021 09:29

Hope the accountant is using an Apple, and not trying to add it up on a Blackberry

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By Paul Crowley
21st Jan 2021 20:25

If mine, I would let client know my opinion and claim what he wants
I always claim some management cost unless agent did it all

Would he be better off claiming miles?

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Replying to Paul Crowley:
By penelope pitstop
21st Jan 2021 20:43

Thanks for that one.

I think there would have been lots of repair trips and perhaps the 45p per mile allowance would exceed the actual "small tools" costs.

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By frankfx
21st Jan 2021 21:08

https://www.youtube.com/watch?v=gi_6SaqVQSw

our younger readers may appreciate the above.

watch to the end.

If the HMRC officer has a sense of humour he /she may allow the minor equipment items.

Thanks (1)
Replying to frankfx:
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By New To Accountancy
22nd Jan 2021 21:08

My father-in - law made me watch this on Christmas day! , I felt very proud that I understood your 'four candles' post.
I also had to watch Laurel and Hardy taking a piano up steps about 100 times and failing miserably.
And then he said he's going to put the 'two Ronnie's' on 'for me', but luckily the whiskey took its toll, just in time.
Pheeeww.

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Replying to New To Accountancy:
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By frankfx
22nd Jan 2021 21:52

Laurel and Hardy
Another Fine mess!

Yes
The piano scene is required viewing.

But also

https://youtu.be/i8xPhU5132I

Well worth watching.

With a whisky or whiskey... there is a difference

Apparently this sketch is an annual must view in Germany at Xmas

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Replying to frankfx:
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By New To Accountancy
23rd Jan 2021 01:11

Now that is funny! Hilarious in fact. Thank you for that Frank.

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Maytuna
By DJKL
21st Jan 2021 22:03

Extending the question slightly, if he had 100 properties and employed a full time handyman under PAYE, and to enable said handyman to do his job provided a complete van full of tools and also provided the van and its running costs , employer liability insurance, contractor liability insurance and had a permanent skip in use, would opinions differ? Because we did this for years( I have a storeroom full of these tools in case we decide to revert to the employed model in the future)

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By the_drookit_dug
21st Jan 2021 23:06

Sorry to be controversial, but I'd be tempted allow all of them. I do most DIY and repairs in my own home, and every task requires a pile of random stuff from B&Q.

Fitting my own bathroom required about £300 of random tools that I didn't foresee at the outset.

A lot of the items you mention are highly consumable and may well already be gubbed if, as you say, he's done a lot of work himself - especially drill bits and brushes. Many other items will be useful for ongoing maintenance of the property, such as radiator bleeding keys, the ladder and the tape measure. Perhaps, as you say, get him to confirm he'll use them for his rental property going forward.

They're all just costs of maintaining his rental property.

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Replying to the_drookit_dug:
Kitten
By Hazel Accounts
22nd Jan 2021 10:30

I'd also allow as repair costs if they are just small items- if you are disclosing to HMRC then they'll disallow if they don't agree, but if you don't ask then you won't get. As someone else said you can explain "risk" to client and up to them.

(Hubby does lots DIY - drill bits break, paint rollers clog, trowels etc get filler hardened on them - a lot of these probably get chucked within the year)

Thanks (2)
Replying to Hazel Accounts:
Maytuna
By DJKL
22nd Jan 2021 10:47

If one say uses cheap paint brushes it is actually cheaper to use once and bin rather than pay an employee to clean the brush after each us (By once I mean one job, polly bag over bristles held by elastic band when not in use means can use for a few days without cleaning)

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RLI
By lionofludesch
21st Jan 2021 22:59

Again, the tax at stake is buttons.

What if he does use some of this stuff at home? It's actually far more likely that he'll use it for future property repairs.

Thanks (1)
A Putey FACA
By Arthur Putey
22nd Jan 2021 09:56

If his activity were a self employed trade a collection of small tools would probably go into an asset pool, without further speculation, so why not here?. But of course the client should consider if there is any private use.

I'll throw this in for fun for the labour element .... if they are not otherwise self employed and haven't used it elsewhere could they pay themelves less than £1000, treat this as property expense and regard it as Trading Allowance for a casual trade of handyman?

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Replying to Arthur Putey:
RLI
By lionofludesch
22nd Jan 2021 10:06

Arthur Putey wrote:

I'll throw this in for fun for the labour element .... if they are not otherwise self employed and haven't used it elsewhere could they pay themelves less than £1000, treat this as property expense and regard it as Trading Allowance for a casual trade of handyman?

I vote no.

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Replying to lionofludesch:
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By Paul Crowley
22nd Jan 2021 17:26

Definitely no

But a different human being?

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Replying to Arthur Putey:
Maytuna
By DJKL
22nd Jan 2021 10:12

I also say no, this would be trading with oneself, something I have heard is sinful in the tax religion( someone will no doubt confirm why)

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Replying to DJKL:
RLI
By lionofludesch
22nd Jan 2021 10:31

DJKL wrote:

I also say no, this would be trading with oneself, something I have heard is sinful in the tax religion( someone will no doubt confirm why)

It's the legal religion, actually. You need at least two parties to a contract.

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Replying to lionofludesch:
A Putey FACA
By Arthur Putey
22nd Jan 2021 10:46

Correct. But there are two separate trades. Or maybe he has a wife who is handy with a stanley knife (lets call her Mrs Bobbitt)

Thanks (1)
Replying to DJKL:
A Putey FACA
By Arthur Putey
22nd Jan 2021 10:47

best not to go onan on about it

Thanks (3)
Replying to DJKL:
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By Joe Soap
25th Jan 2021 11:09

..... and I have heard it makes you go blind, and if you did you wouldn't be safe using some of those tools

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Replying to Arthur Putey:
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By Wanderer
22nd Jan 2021 11:47

Arthur Putey wrote:

I'll throw this in for fun for the labour element .... if they are not otherwise self employed and haven't used it elsewhere could they pay themelves less than £1000, treat this as property expense and regard it as Trading Allowance for a casual trade of handyman?

The legislation makes specific provision to restrict the use of the allowance against income from the individual's employer, the individual's partnership and the individual's own company. It doesn't need to mention restricting the allowance against income from the individual themselves as it can't happen.
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By cfield
25th Jan 2021 13:34

Most of this stuff counts as repairs and maintenance as they are consumables rather than tools. The others will qualify for Annual Investment Allowance so long as they aren't kept in the let property. Strictly speaking there should be a % deduction for private use but for such low sums it's hardly worth it. Just make an appropriate disclosure in the additional info box. You should be safe then after a year. Unless, of course, you're using the Let Property Campaign, in which case you don't need to file tax returns or itemise anything. Just keep records of the calculations.

The replacements allowance is mainly for furnishings and household equipment like ironing boards and vacuum cleaners. Tools qualify too if kept in the let property so you have a second bite of the cherry there. Also kitchen appliances, although the big issue with them is whether they are free-standing (replacements) or built-in (repairs and maintenance). Either way, it makes a difference whether they are new features or not. If so, they are either improvements if built-in or disallowable if free standing.

To be honest, the whole replacements thing is a joke. Small landlords tend to say that everything is a replacement. There is no way of proving or disproving this unless they took pics, which could have been taken anywhere. I always advise new landlords to replace furnishings and household items after a letting starts, just to reinforce their claim. It is even worth moving old mattresses, etc, into a new property so the new ones count as replacements. Not that the taxman is ever going to quibble over it.

The other big issue with repairs & maintenance is whether the property had already been introduced to the letting business. This is much easier to claim if the landlord has existing lettings. For new landlords, you need to ascertain when they first decided to let the property. Sometimes you find it was advertised for sale, which rather gives the game away.

You also find sometimes that the landlord was still living there or using the place for storage. That means the property was not yet available for letting or it potentially doesn't qualify as a void between lettings, as it has to be wholly and exclusively for the trade. For a new landlord, you then need to decide if any of the expenses for that period qualify under the pre-trading rules. Council tax and utility bills certainly don't if they were still occupying the property. Nor do routine repairs and maintenance, as everyone has to do that. Only letting-related expenditure would qualify, such as gas checks or electrical testing. Anything else would be open to debate.

It can be a real minefield. I've just had to advise a client not to live in a previously let property while she spends months refurbishing it, at least not officially. She wanted to make it her temporary address! People don't understand. You can't just claim anything, no matter how reasonable it might seem to the man in the street. You have to follow the rules to the letter, however arcane they might seem.

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Replying to cfield:
By penelope pitstop
25th Jan 2021 14:16

Thanks for that very helpful response.

So if a landlord of a handful of properties has the following equipment purchased solely or mainly for his let property maintenance and repairs kept OUTSIDE of the properties (at his home) he can claim capital allowances on them:

Trailer for van £500
Carpet cleaner for periodic cleaning £400
Electric drill £200
Lawnmower £300
Etc. etc.

I knew you could not claim capital allowances for P&M within the residential property but must have forgotten about stuff kept OUTSIDE of the property.

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Replying to penelope pitstop:
By cfield
25th Jan 2021 14:48

Yes, all those items count for AIA, subject to the private use deduction. They must have been purchased during the tax year though and the claim must be made within the time limits, otherwise all the landlord can claim is annual WDA.

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Replying to cfield:
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By mrshamilton
26th Jan 2021 07:58

I have had a recent discussion re this with colleagues and was told I couldn't claim capital allowances regardless of inside or outside the home on residential property. I've googled and can't find the reference that I can claim, do you happen to know what it is please?

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Replying to mrshamilton:
By cfield
26th Jan 2021 09:35

Not offhand no, I just happen to know it's true. General principles I'd say. I'm sure your firm has got its own tax advisors it can ask - for a fee.

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Replying to cfield:
By penelope pitstop
28th Jan 2021 02:03

Please see my response/query to Mrs Hamilton below.
My mind has started boggling over this now.
And yes, you are correct. It is Wacky and not Whacky. I stand corrected.

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Replying to cfield:
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By mrshamilton
28th Jan 2021 06:53

yes we do, thank you

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Replying to mrshamilton:
RLI
By lionofludesch
26th Jan 2021 09:55

mrshamilton wrote:

I have had a recent discussion re this with colleagues and was told I couldn't claim capital allowances regardless of inside or outside the home on residential property. I've googled and can't find the reference that I can claim, do you happen to know what it is please?

This stuff isn't residential property.

It's tools.

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Replying to lionofludesch:
By penelope pitstop
28th Jan 2021 02:23

.

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Replying to mrshamilton:
By penelope pitstop
28th Jan 2021 02:01

This has got me wondering too. Maybe the reference is to CA20020 here with reference to solar panels in the garden of a house:

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca20020

But suppose a landlord buys a £400 lawnmower to cut the lawns of the block of flats versus a £400 carpet cleaner to do an annual clean of the flat carpets versus a £400 fancy drill for drilling within and outside the flats.

The lawnmower will never be used within the flats whereas the carpet cleaning machine always will be. However, the fancy drill will be used both inside and outside the flats.

So which of the three bits of kit attract AIA/capital allowances in the landlord's SATR. My mind is boggling

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Replying to mrshamilton:
By penelope pitstop
28th Jan 2021 02:22

Just found the reference, which is at CAA 2001 s35:

https://www.legislation.gov.uk/ukpga/2001/2/section/35

So it seems that a carpet cleaner kept by the landlord cannot attract AIA/CAs because it is bought for use in a dwelling house.

That is unless anyone knows better!

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Replying to penelope pitstop:
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By mrshamilton
28th Jan 2021 06:56

Is there a difference as to whether it is treated as a business? I thought for it to be treated as a business more rules applied, such as going beyond normal landlord duties or am I reading much too much into it now?

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Replying to penelope pitstop:
By cfield
28th Jan 2021 11:01

I think you're right. I always interpreted that rule as excluding items "kept in" a dwelling house (which must include garden and grounds too so tools kept in a shed would also fall foul of this) but s35 says "for use in" so a carpet cleaner would fall foul even if the landlord keeps it at home. The same goes for vacuum cleaners, garden tools and small electricals for indoor use. However, there might be some leeway for tools used "on" a dwelling house, such as masonry drills, ladders and the angle grinder you listed in your OP.

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Replying to mrshamilton:
By penelope pitstop
28th Jan 2021 02:24

.

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Replying to penelope pitstop:
By cfield
26th Jan 2021 09:37

By the way, it's wacky not whacky, as in the Wacky Races. As Penelope Pitstop, you should know that :-)

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By penelope pitstop
26th Jan 2021 15:11

Fascinating stuff.
So if the above is correct, a landlord who buys a trailer for his vehicle which is 25% used to carry away house debris and gardening clippings for tidying up and maintaining his property portfolio can obtain 25% AIA on the purchase.
Also, a landlord who owns a block of flats installs a £100,000 elevator for communal access. Presumably that then qualifies for 100% AIA.
But being the generous soul he is, he installs a £25,000 elevator for a disabled resident in their two story flat within the block of flats. That would then presumably NOT qualify for the AIA because it is within a flat itself.
That's how I see it.
Any opposing views?

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Replying to penelope pitstop:
By cfield
26th Jan 2021 15:44

Correct. The £25k elevator would be an improvement deductible against CGT, assuming it was still reflected in the state or nature of the asset at disposal. It wouldn't qualify for AIA as an integral feature as it is contained wholly within a dwelling house. The £100k elevator would qualify for AIA however, as it is only for the common parts, not individual flats.

Same goes for kitchens and bathrooms within HMOs if they don't already qualify as repairs & maintenance, such as kitchen appliances or shower cabinets that weren't there before, provided they are for the use of more than one family unit.

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