allowable expenses on residential property lettings

morpheus

Can someone tell me whether replacing an old boiler with a new one in a property rented out is classified as capital expenditure or whether it could be allowable expenditure to be written off the rent received?

I believe that it has to be a fixed asset, but a friend of mine seemed to think that it could be written off as an expense.

Many thanks for your help.

T.C.

My initial response to this would be a capital expense, because you will be upgrading the old boiler with a more efficient one. If you were to repair it, then that would be an allowable expense. If you are unsure, it might be worth a letter to HMRC to clarify.

tonyd

I'm not sure it's straightforward.

If the boiler is beyond economic repair and is replaced to the equivalent modern version -can it not be argued that the expenditure is revenue? For e.g. if the "old" boiler cost £200 5 years ago and your client spends £200 today, inevitably they will get a better boiler because of newer technology but it's still a like for like upgrade.

If there is another reason for the upgrade e.g. in order to meet safety regulations which where needed to bring the property into a lettable state, then that would be capital.

Monsoon

It's my understanding that if it's a repair (the old one broke) and the replacement is an upgrade (because of updated technology/ building regs/ market standard) then it's allowable as revenue expenditure.
It's worth looking up in the Tolley's or something as there are some exceptions.
Your example sounds revenue to me, providing the property is currently letted out.