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White Goods-Fixture v Freestanding(& CO Detectors)

Rental Expenses - Replacement Domestic Items Relief v Property Repair

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Private landlord REPLACES numerous white goods in his properties on a like-for-like basis.

None of the replacement white goods appears to be freestanding. He says they are either integrated or built-in.

However, one of the replacement appliances, a fridge freezer, was meant to fit into a unit from which the broken appliance was removed. Unfortunately, the new appliance was a tad too big and so the unit doors had to be removed to make room for the new appliance.

So, although the new fridge freezer was meant to be built into the old unit it now looks like a freestanding appliance housed within the old unit.

So, what is the income tax position on all of these REPLACEMENTS. My understanding is as follows:

A) White goods which are fixtures (i.e. built-in or integrated) - Property repair (Box 25 Page UKP 2).

B) White goods which are freestanding - Replacement domestic items relief (Box 36 Page UKP 2).

My questions are:

1) Have I understood the post-5 April 2016 rules correctly.

2) I am proposing to allow the replacement fridge freezer as a property repair on the assumption that it was meant to be a replacement built-in or integrated appliance. Please let me know if there is any contrary argument.

3) Is there any case law as to how domestic goods become fixtures. And does "built-in" equate to "integrated" for rental income tax expense purposes.

4) As far as replacement carbon monoxide detectors are concerned, what is the difference in tax treatment between one which is screwed into the building versus a portable detector. They do appear to have quite long lives.

 

 

 

 

 

 

 

Replies (6)

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By Accountant A
15th Jun 2020 18:21

oughiohg

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Replying to Accountant A:
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By whitevanman
07th Jun 2020 19:13

Don't think I would wholly agree.
If you follow your 3rd link, for example, the article refers to conditions A to D being met. One is that the expenditure is capital. It has long been accepted that replacing an integrated item in a fitted kitchen, is a repair. The article also goes on to refer to fitted kitchens as outside the scope.
I think Penelope has it just about right.

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Replying to whitevanman:
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By Accountant A
15th Jun 2020 18:21

piugfi

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Replying to Accountant A:
By penelope pitstop
08th Jun 2020 12:48

Difference in tax treatment? Good question.

There is a special box on the property income tax pages just for "Replacement Domestic Items Relief" (Page UKP2 box 36). Failure to claim in this box by putting the expense in box 25 (property repairs and maintenance) may possibly preclude a valid claim after enquiry by HMRC.

So, if HMRC adopt a harsh line with these claims, it is going to be a serious matter going forward.

Box 25 is for repairs to the property (which would include replacement fixtures), whereas box 36 is for these freestanding white goods and other furnishings and fittings.

So, I assume that a ceiling rose would be a fixture, whereas a lampshade would be a fitting. In either case replacement expenditure should end up in a different box.

By creating two separate boxes on the property income pages HMRC is WANTING taxpayers to show the difference. HMRC must then have a genuine reason for wanting to know what should go in box 36. Is it so HMRC can challenge these claims or maybe find out if it is a like-for-like claim or an expensive white goods/furnishings improvement.

Either way, it is best getting it right at the outset.

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Replying to penelope pitstop:
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By whitevanman
08th Jun 2020 15:47

In general, relief for revenue expenditure is given at 100% (effectively) whereas capital expenditure is subject to whatever special rules the government choose to apply.
Also, whenever new measures are brought in, they like to have some idea of what it is costing, sometimes simply because they might be asked. I don't think it is just to trip-up the unsuspecting. Nor will anyone target enquiries just to find a wayward claim for a free-standing fridge.

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By whitevanman
07th Jun 2020 19:34

Penelope
I would agree with you on points 1 and 2.
As regards 3, there is some old case law about what is a fixture. Most typically it is stuff you would expect to be left in the property on sale. So, CH systems and fitted kitchens. In the latter connection, it is widely accepted that "built in" appliances are part of the fitted kitchen. Insurers for example treat them as part of a claim under the "buildings" insurance whereas freestanding items are covered only by the "contents" policy.
If I remember correctly, the status as a "fixture" depends on the reason why the item is affixed to (and becomes part of) the building. If affixation is temporary and no more than is necessary for the asset to be used or enjoyed, it is unlikely to be a fixture. A picture hung on a wall fits the bill. A freestanding fridge is only "fixed" by the electrical cable. An integrated / built-in appliance is a more permanent part of the fitted kitchen and a fixture.
I suppose the answer to your 4th point is (partly) as above. A hard-wired unit is a fixture whereas a portable or stick-on unit is probably not.
Edit
The HMRC Capital Allowances manual around CA26025 (Ithink) has more on fixtures.

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