rental property

Hazel Thomson
Hazel Thomson Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
Hello,
I have just been asked to complete a tax return for a client with one rental property. The contract states that the tenancy shall be from 27th.March 2010 so looks like I will have to do a return for 10days.
The house was competely re-decorated to let out. This included re-fitting the bathroom and maybe part of the kitchen.
The house has been let out as unfurnished, white goods only.
A new washing machine, fridge freezer and window blinds were bought and fitted to the property.
I know that I can claim for maintenance and repairs and not improvements but I'm not sure whether the bathroom fittings would be improvements if it had to be replaced because it was not up to standard for prospective tenants?
Also not sure if I can claim capital allowances on the washing machine and fridge freezer?
I hope someone can let me know what is ok to claim.
thanks.

Comments

  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 🎆 🐘 🎆
    Like-for-like replacements are revenue expenditure; this includes 'upgrades' to modern standards e.g. standard uPVC double glazing to replace old single glazed windows.

    Therefore if the refits were replacements they will be revenue, even if it was a big spend. Sounds like they could well be.

    Not sure on the white goods. I'm pretty sure you can only claim CAs on furnished lettings, and you claim 10% of the gross rent (I think, from memory). So as it's unfurnished I don't think you can claim this capital allowance. I honestly can't remember what you do when an unfurnished property is let with white goods.

    I highly recommend Tolleys Tax Guide, it should have all of these answers in it. It's the one tax book I buy every year.

    [And then because I don't like not knowing so looked it up.....!! :lol:]
    Also HMRC Manuals... I think this one will give you what you need:
    http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm

    "If the accommodation isn’t furnished, or only partly furnished, the 10% wear and tear allowance isn’t due."

    Look near the bottom of the page
    "Renewals: furnished & unfurnished property"
    I think that's the bit that applies to your case.
  • Hazel Thomson
    Hazel Thomson Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
    rental property

    Thank you, that was very helpful. I have read the article, I will need better info from client to be comfortable that it was revenue not capital.
    Can I just submit a tax return for the rental property? as this is an individual who doesn't normally need to complete a tax return I don't suppose I need to include a return on their employment?
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 🎆 🐘 🎆
    If you have to submit a tax return, you have to complete all income sources in the year, so that includes employment, interest, dividends, self employment, land and property, capital gains etc.

    Without meaning to cause any offence, that's a very basic principle for someone in practice.
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    White goods, such as cookers are simply replacements/repairs and therefore revenue expenses. They are usually relatively cheap anyway. If the property is furnished, then you can use the 10% wear and tear allowance instead, but not if you are only talking about white goods. Hope that helps.
  • MoneySavingBank
    MoneySavingBank Registered Posts: 143 🎆 🐘 🎆
    What is the ISBN and Full Name of this book?
    Monsoon wrote: »
    I highly recommend Tolleys Tax Guide, it should have all of these answers in it. It's the one tax book I buy every year.

    Thanks again Monsoon,

    Could you please give us the full name of the Book with the ISBN?

    & when do they release their new edition each year?

    Regards,

    MSB
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 🎆 🐘 🎆
    Thanks TC

    MSB I've no idea about release date - there's a new edition out each year and I tend to buy it towards the end of the tax year to which it relates.

    No idea on ISBN but it's called Tolley's Tax Guide and a google search will find it, as wil la search on Amazon, Waterstones etc :)
  • Hazel Thomson
    Hazel Thomson Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
    rental property

    Hello,
    Thanks for your comments.
    The property is let unfurnished with white goods only, but this is the first year it's been let.
    The property was purchased in Jan 2010 redecorated with some refurbishment and a new washing machine and freezer bought before letting it in March 2010. I quess this would more likely be a capital purchase than renewal therefore?
    I have been reading anything I can find about it but can't quite decide on treatment of these, and if I do claim capital allowances on them would it come under AIA or 20% WDV or other?
    As you can see I don't have much experience with rental properties but learning all the time. I had a sudden moment of doubt re: the return including all income...
  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    A refurbishment would be capitalised and not necessarily depreciated. Any repairs and replacements during the tenancy would then be revenue expenses. In my view there would be no real need for capital allowances or AIAs.
    What is your query regarding the income?
  • Hazel Thomson
    Hazel Thomson Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
    I think I have it sussed now, there would be no claim on the white goods because it is let unfurnished and they are for the use of tennants.
    Most of rest of work done was redecoration and replacement some capital.
    i.e. bathroom suite and tiling replaced as in poor condition, kitchen similar, worn carpets replaced with laminate flooring, small amount of plastering on cracked walls and all painted.
    I have no query on income.
    It's just the difficulty of deciding which is revenue or capital expense, the house has just been bought and done up for letting within three months.
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    A few pointers:

    - Capital allowances are not available on any furniture and equipment supplied with residential accommodation that is let furnished (unless it is a qualifying furnished holiday let);

    - If the property was not in a 'lettable condition' before the work was carried out then HMRC will consider it all to be capital. This is a judgement call and before and after photos will help your case (or not!);

    - Renewals basis can be claimed instead of wear and tear for removable fixtures and fittings (e.g. furniture and white goods) but not on original purchase.

    - Renewals basis can be claimed as well as wear and tear for integral fixtures and fittings (e.g. bath, sink, toilet) but not on original purchase.
  • Hazel Thomson
    Hazel Thomson Registered Posts: 11 Regular contributor ⭐ 😼 ⭐
    Thank you, that was really clear helpful advice...all sorted now. :0 )
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 🎆 🐘 🎆

    - Renewals basis can be claimed instead of wear and tear for removable fixtures and fittings (e.g. furniture and white goods) but not on original purchase.

    - Renewals basis can be claimed as well as wear and tear for integral fixtures and fittings (e.g. bath, sink, toilet) but not on original purchase.

    Just to add to this, if you're claiming renewals basis, you will have to keep the receipt for the original purchase in order to demonstrate that the replacements qualify for the relief. I was reading up on this for my tax exams and it said record keeping is especially important for this.
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