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repairs or improvements

repairs or improvements

Didn't find your answer?

just taken a on a new pub client

they've incurred a lot of expenditure in the year and I'd like a little guidance if poss

they have re-upholstered all existing chairs in the year - approx £11k work of work - no new chairs just new coverings

do we treat this as a repair or an improvement?

kitchen - has been replaced like for like - approx £6k again do we treat as a repair or an improvement?

prior year accounts from the old accounts don't have the furniture listed as an asset nor the kitchen - only the cooker!

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Chris M
By mr. mischief
09th Nov 2015 15:26

repairs

They both sound like repairs to me.  My general approach to this is:

1.  Some stuff where the fabric of the building is involved - exlcuding the integral features - is clearly capital.  We are not claiming this.

2.  Some - such as the like for like replacements you mention - is clearly revenue, we are claiming this.

3.  That potentially leaves a whole chunk of "grey area" stuff where no doubt Wetherspoons (Google Wetherspoon v HMRC) would treat it as revenue, and no doubt many inspectors would treat it as capital.  I explain this to clients and invite them to make a choice, 90% choose "revenue".  I ensure the 90% have tax investigation insurance, and that at least one tax case can be argued as a precedence for my treatment of each item, even if HMRC could find another 20 going the other way.

Personally I think that, given England has had taxation since 1085, law setters have had ample opportunity to reduce "grey areas" to near zero.  Unless 900 years is not enough time, we must conclude our law makers want us to have lots of tax "grey areas" to work with.

"Grey area" = "fair game" !!

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By Energise Accounting
10th Nov 2015 02:00

Repairs

HMRC guidance is that genrally replacements for like to like to it nearest modern equivalent can be treated as revenue expenditure.

As for the prior year accounts with no listings. Your client will have a inventory as part of the sale agreement and this will list all the fixtures and fittings owned by the business at the date of sale.

The pub trade is a area I specialise in. As I only take on pub clients if you need any help just get in touch.

 

 

 

 

 

 

 

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By aland
10th Nov 2015 09:26

Inventory

As I see it if you put through the expense(s) as Repairs (revenue?), then you still won't be adding to the assets. Presumably they are effectively fully depreciated. 

If any expense goes through as Improvements, then that will become an asset.

 

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