Replace and renew? Are you a residential landlord?.......

Author - Cecile Hunt

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Replace and renew?

Are you a residential landlord?  Do you rent out your property, unfurnished/partly furnished or fully furnished?

First consideration is what exactly are all these 'furnished' categories?

•  Unfurnished - no furnishings except kitchen appliances; fridge, freezer, washing machine, carpets, curtains.
  
• Part furnished - as above with some other basic furnishings.
• Fully furnished - tenant can move in as though it were a holiday self-catering property.

 
Tax allowable expenses related to residential rental properties re furnishings has changed.

From 6 April 2013, the sole relief available to residential landlords is the 10% wear and tear allowance and, because this can only be claimed in connection with fully furnished properties, it follows that landlords of unfurnished (or partly furnished) residential accommodation cannot claim relief for the cost of replacing items such as cookers, fridges, dishwashers, curtains, carpets and so on.

•  Fully furnished - 10% wear & tear allowance available - this allowance can be claimed on fully furnished properties only. Other expenses relating to renewing anything not integral to the building cannot be claimed in addition to the 10% allowance.
  
• Un or part furnished - no 10% wear & tear allowance
• Un, part or fully furnished - renew and replace allowance is no longer available

 
If the cooker, dishwasher, fridge, etc is built in and is classed as integral to the building any 'like for like' replacement can be treated as a 'repair' and is therefore an allowable expense.  If replacement is an 'upgrade' to the item being replaced this is then a capital expense and not claimable as a repair.

The above is written from the view point of an individual landlord and not a rental company; it is a simplified overview of allowable expenses for individual landlords. 

Tolley, part of LexisNexis, have recently reported that in a recent survey carried out by the Residential Landlords Association where they were asked to survey their members it was found that over 75% landlords surveyed were not aware of the removal of the renewals basis allowance by HMRC.  Of the  Landlords who replied to the survey 74% provided white goods, 98% provided carpets and 79% provided curtains.

It would appear that the new expenses allowance rules may in most cases have an effect on the frequency items are replaced in the future - of course if you have a non-fully furnished let you could change it to be fully furnished and claim 10% wear & tear!

For more information on this subject please contact Cecile Hunt. 

Cecile is licensed to practice in accountancy and has run her own business for ten years, she has a wealth of experience in advising and assisting start-ups, micro and small businesses in running their business' plus advising on, and dealing with, taxation issues, including  VAT, of sole-traders, limited companies, partnerships and personal tax.