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Landlords, Capital Allowances, Desktops & Laptops

Landlord Wants To Claim for Desktop Computer + Monitor Bought for Rental Business Purposes, CAA s35

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Individual landlord bought desktop computer and monitor SPECIFICALLY for managing his rental business matters (3 residential properties). Business use of these is approaching 100% and the equipment is used from home. He wants to claim for the cost of these against his rental income.

He has an Apple Mac for his own separate professional business, and most other professional work and private matters are done on his Apple iPhone.

I have examined the following two sections of the Capital Allowances Manual:

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

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23060

It would appear no rental tax allowance is due for the above two purchases because the desktop and monitor are used in a "dwelling house" (the client's own home) as per:

https://library.croneri.co.uk/cch_uk/btl/caa2001-it-s-35

Does this then lead to the perverse situation of, say, a landlord who does all of his rental work on his laptop "on the hoof" outside of his home. Would it be stretching it to make a claim in that unusual case?

Just wondering.

 

 

Replies (26)

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By David Ex
27th Sep 2021 13:33

penelope pitstop wrote:

It would appear no rental tax allowance is due for the above two purchases because the desktop and monitor are used in a "dwelling house" (the client's own home)

I’d hope that very literal interpretation wasn’t correct. As I understand, those provisions are to prevent claims for capital expenditure within let residential properties.

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Replying to David Ex:
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By Paul Crowley
27th Sep 2021 13:42

Same here
Management expenses by a landlord usually so much cheaper than letting agent charges

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Replying to David Ex:
By penelope pitstop
27th Sep 2021 13:53

I am hoping that I am wrong here too.

I did an hour's google search on the subject, checking various landlord tax advice sites as well as Tolleys. It seems that the various landlord tax advice sites seem to sidestep tackling the issue of capital allowances for computer expenditure within private landlord costs of managing the business

I was hoping that the CAA legislation was targeted at expenses within the actual "dwelling house", but I cannot see anything which suggests the disallowance is limited to expenditure on the rental property.

I was hoping someone could disagree with me but suggest where in the legislation the capital allowance is permitted for the computer costs. Or is it buried somewhere in the wording of CAA s35?

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Replying to penelope pitstop:
By ireallyshouldknowthisbut
27th Sep 2021 14:34

@penelope I think you are up the wrong tree

The provisions you link to are I think regarding equipment provided within the dwelling house, ie the dwelling house being let.

The wider question of your clients claims are valid is a different one.

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Replying to ireallyshouldknowthisbut:
By penelope pitstop
27th Sep 2021 16:14

I do hope I am "barking up the wrong tree", as you say.

CAA 2001 s35 (2) says "The person’s expenditure is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house."

If I extract the phrase "in providing plant and machinery" from the above, it would appear to my lowly brain that ANY expenditure on plant and machinery for use in a dwelling house does not qualify for capital allowances.

However, I wonder if the phrase "in providing" has a special meaning that changes the sense so as to mean a "supply" of plant and machinery to the tenant. Because the landlord does not/cannot "supply" any office equipment to himself then maybe that is why p&m expenditure for managing the business is then allowable.

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Replying to penelope pitstop:
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By David Ex
27th Sep 2021 17:43

I think your example “landlord who does all of his rental work on his laptop "on the hoof" outside of his home” demonstrates why the restriction doesn’t apply as you fear it might. You could equally put the computer in the garden shed to avoid it being used “in a dwelling house”.

A lot of tax law is rather daft but that would really take the biscuit.

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By Truthsayer
27th Sep 2021 13:45

I would bet a pound to a penny your client is lying about it being purely for the rental business. It's like when they say their big screen TV is used only as a PC monitor, or their £2,000 bicycle is only for business journeys.

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By Bobbo
27th Sep 2021 13:47

penelope pitstop wrote:

Individual landlord bought desktop computer and monitor SPECIFICALLY for managing his rental business matters (3 residential properties). Business use of these is approaching 100%

 

Your client is having a laugh surely? A whole extra computer to manage three residential properties.

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Replying to Bobbo:
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By NotAnAccountant2
27th Sep 2021 18:16

Bobbo wrote:

penelope pitstop wrote:

Individual landlord bought desktop computer and monitor SPECIFICALLY for managing his rental business matters (3 residential properties). Business use of these is approaching 100%

 

Your client is having a laugh surely? A whole extra computer to manage three residential properties.

Depending on what he does on his main business computer he might genuinely have this so as to avoid getting the two businesses confused.

I use a vm rather than a whole new machine but during WFH I had a completely separate 'machine' just for running zoom calls for work and another just for citrix.

His 'business' laptop may be set to wipe the disk on too many failed logins, or be able to be wiped remotely. He might not want to risk losing his BTL records if that happens.

(hopefully he keeps regular backups!)

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Replying to Bobbo:
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By Rgab1947
29th Sep 2021 11:40

Why not?

Why must he be frugal.

I certainly have much more computing power that I will ever need because I want speed, good graphics, plenty memory because that is how I roll (Its only used for business - in my garden shed). No one can tell me what equipment I want to use to manage my business.

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Replying to Rgab1947:
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By Bobbo
29th Sep 2021 13:54

Not saying they have to be frugal.

My point was more that, based on my past experience as a tenant of a residential property, the monthly management by the landlord of a residential property can be done while waiting for the kettle to boil. E.g. look at bank account, check for receipt of rent, check DD for mortgage, done. (Once every 12 months arrange for somebody to go round to do the gas safety check.)

Thus I find the idea that a computer would be wholly and exclusively (though OP did say 'approaching 100%' suggesting not in fact w&e) used in the property business a little hard to believe.

Guess i'm just exercising professional scepticism.

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By alialdabawi
27th Sep 2021 14:04

Allowed - how else would landlords have their taxes made digital?

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By SXGuy
27th Sep 2021 14:25

Tell him to allow you to set a bios password that you'll only provide every Monday and Friday for 2 hours so he's prevented from using it personally the rest of the week. Then allow the expense.

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Replying to SXGuy:
RLI
By lionofludesch
29th Sep 2021 12:46

SXGuy wrote:

Tell him to allow you to set a bios password that you'll only provide every Monday and Friday for 2 hours so he's prevented from using it personally the rest of the week. Then allow the expense.

Hello !

We've been hacked by HMRC.

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By Tax Dragon
27th Sep 2021 14:39

You should introduce your client to MDTP. (So long as TP has wi-fi.)

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RLI
By lionofludesch
27th Sep 2021 20:18

I've always thought it would be somewhat churlish for HMRC to insist on business records being kept on a computer and then complain about the purchase of computer hardware.

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Replying to lionofludesch:
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By Hugo Fair
27th Sep 2021 20:43

... and of hardware maintenance, software, insurance, internet service provision, electricity, backup/recovery services, et al!
A bit like a car, hardware doesn't do much on its own.
Mind you, nor does software - unless you worship at whatever altar HMRC attends.

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Replying to lionofludesch:
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By David Ex
27th Sep 2021 23:22

lionofludesch wrote:

I've always thought it would be somewhat churlish for HMRC to insist on business records being kept on a computer and then complain about the purchase of computer hardware.

We’re subject to (tax) law but have to pay to get a definitive copy of the legislation. That always struck me as rather rich.

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By kiwilondon99
28th Sep 2021 09:31

'desktop pc + monitor are cheap as chips now [if not apple or a super gamer spec machine ]' so, what is the CAPEX policy... A mobile smartphone can be more expensive. Expensed then no CA implcations ?

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Replying to kiwilondon99:
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By David Ex
28th Sep 2021 11:30

kiwilondon99 wrote:

'desktop pc + monitor are cheap as chips now [if not apple or a super gamer spec machine ]' so, what is the CAPEX policy... A mobile smartphone can be more expensive. Expensed then no CA implcations ?

Not sure treating capital expenditure as revenue for accounting purposes changes the tax treatment.

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Replying to David Ex:
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By Tax Dragon
28th Sep 2021 11:56

I am sure that it shouldn't. But you and I are two of the few in here that seem to understand that. (Which is depressing, as it's pretty basic stuff.)

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By Homeworker
29th Sep 2021 15:27

If a landlord cannot claim capital allowances, then why is there a box on the property pages allowing you to do so? I have a client with several properties and have allowed him to claim modest office costs and capital allowances for computer equipment. We have also claimed for lawnmowers etc that he uses at all of the properties, being taken to each one as needed. We used to claim capital allowances on a van that was used to travel around the properties until they stopped that a few years ago, so now we claim mileage.

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Replying to Homeworker:
By penelope pitstop
01st Oct 2021 14:29

Landlords can certainly claim for capital allowances. The SA property tax return pages can include both residential and commercial property rents and expenses. So capital allowance claims for commercial property rents are more clear cut.

However, capital allowance claims for residential properties are slightly more problematic due to CAA 2001 s35 (2) mentioned above.

The third area is capital allowances for the property portfolio management itself. A van trailer used for landed estate management purposes would attract capital allowances. But I assume (and no-one has confirmed it yet) that s35 (2) must have been drafted in such a way that the landlord can claim capital allowances for a computer he uses at home (his own "dwelling house") for landlord management purposes, but not any p&m he installs in one of his rented residential properties (i.e. a tenant's "dwelling house").

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By Tax Dragon
01st Oct 2021 14:52

It would be interesting to know what a tribunal judge might make of this provision. I do hope Richard hasn't abandoned us to our ignorance.

FWIW, my take on s35 is that the words "for use in" in ss2 are about the purpose of buying the plant or machinery, not where it actually ends up. HMRC's example of solar panels in the garden not qualifying because they are "for use in" the house (the 'use' being of the electricity they generate) shows how this can work against you. [I'm not 100% convinced HMRC is right with that example, btw, but let's roll with it for now.]

Conversely, I would say that the purpose of the equipment in your case was to manage the business. It's not "for use in" a house. That's so even if landlord ends up using the equipment at home.

(I'm not sure I've explained that very well/quite said what I mean [it's Friday afternoon!], but I hope you can see what I'm trying to get at.)

Edit - oh sorry, HMRC example at CA23060.

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Replying to Tax Dragon:
By penelope pitstop
01st Oct 2021 15:22

Thanks Tax Dragon for a helpful response.

An interesting comparison in point is a landlord who bought a carpet cleaner to clean the rented property carpets specifically on change of tenant. It saves him money in the long term by avoiding the cost of frequent replacement carpets.

The carpet cleaner is a sensitive piece of kit, so he keeps it safely in his own home (wise chap).

But it is primarily used when the tenant vacates, so it is only used by the landlord himself in the dwelling houses of his tenants. A quick reading of s35 (2) suggests it is not allowable because it was bought for the sole use in a dwelling house.

An alternative view is that it is an allowable capital allowance cost of management because it will never be used by any tenants. But s35 (2) is driving me nuts because it seems to disallow the expenditure.

Any further considered views would be appreciated.

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Replying to penelope pitstop:
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By Tax Dragon
01st Oct 2021 15:26

I think the carpet cleaner would fail the "for use in" test.

(By "fail" I mean fail to attract tax relief :-).)

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