Buy to let is getting external refurbished. This tax deductable?

foxyuk

Hi guys I have a flat currently let it's in Glasgow southside and there is a regeneration on in area at moment. I have secured a 50 per cent grant so my contribution is £5300 to be paid to the factor Glasgow council within 12 months

Works being carried out claddind, roofing , soffits , railings and close painting. - all external Looking at tax website says refurbishment not Tax deductactable Surely I am missing something

jimmo

Improvements are capital expenditure and will be allowable in your Capital Gains computation when and if you sell the flat.
Repairs are revenue expenditure allowable against your rental income.
Cladding is probably an improvement. If you bought the flat 30 years ago and the roof was sound then you should be able to reason that the roof is being repaired but if you bought the flat 6 months ago when the roof was already a bit iffy it is more likely to be regarded as an improvement.

foxyuk

There was nothing wrong with the roof, brickwork , roof etc and did not need repairs. Glasgow city council are carrying out refurbishmemts on council houses mine has 7 owners and 1 council tenant and more than 50per cent voted for the work. If there were no counci tenant in the block no work would have been carried out.

So for the next 18 months I will make a loss on the flat every month as my mortgage, factor fees etc and this further £480 every month means I will out of pocket over £200 every month after I get rent.

There must be a tax exclusion for external building works in cases like this it's not as if it was required or I instigated it. Must be loads of landlords in same situation

jimmo

As it happens, I live in a former council house in an area which has benefited from E U grants and, whilst the council tenants got their improvements free I was offered the opportunity to partake and paid £250.for work on my house which I reckon, would have cost at least £2,500, probably more. I think I got an absolute bargain but tax didn't come into my thinking.
You, on the other hand, own a flat and seem to have been charged for works done by a form of democracy. The majority wanted it, therefore you have to pay up.
If you feel that you have been stitched up by the local council your remedy is seeking compensation from the council.
Tax relief is not a consolation prize

John_Pierpoint

Most of this sounds like repairs by a ground landlord to me. The sort of charges that any flat owner faces if there is not a well established sinking fund type of arrangement in addition to the ground rent?
[I do realise that I know nothing about Scottish property law but I do know that "the close" is the communal stairs]

I believe that HMRC has recently been forced to accept reality and rotten wooden windows can now be "repaired" using PVC replacements ?

chrismac1

This is a no-brainer. You CLAIM this as repairs on your tax return and keep a good documented record of all the factors which are in your favour for arguing that the work was repairing a dilapidated structure and not a capital enhancement. In the unlikely - less than 3% - event that this is the subject of an HMRC enquiry, you immediately respond with all these arguments in writing, and at least they know you'll not just be caving in without a fight, so good chance they'll just go away.

MacMickster

chrismac1 wrote: »

This is a no-brainer. You CLAIM this as repairs on your tax return and keep a good documented record of all the factors which are in your favour for arguing that the work was repairing a dilapidated structure and not a capital enhancement. In the unlikely - less than 3% - event that this is the subject of an HMRC enquiry, you immediately respond with all these arguments in writing, and at least they know you'll not just be caving in without a fight, so good chance they'll just go away.

As OP states that repairs were not needed then this at least part of the expenditure is likely to be improvement, or replacement (eg the roof and soffits). It seems that your advice to the OP is to "try it on" with the percentages in his favour that HMRC won't catch him out. To me this is both poor and unethical advice.

BoGoF

It seems this is Chrismac1's speciality - giving poor advice when it comes to tax and rental income. Perhaps he should stick to what he does best - HMRC bashing. What's that?....is that a COMPLAINT i feel coming......

cinderfella

Property expenses allowable:--
a) repairs & maintenance (but not improvements)
b) painting & decorating (inside & out)
c) other work necessary to prevent the property from deteriorating (eg:stone cleaning, damp treatment)
d) if an 'improvement' cost is made in order to meet modern building standards - a capital allowance at the appropriate annual rate can be claimed
e) there is a landlords energy savings allowance for cladding/draft proofing of £1500 per property

those are the rules but always subject to interpretation. 25 years ago we always argued that upvc windows were an inferior repair to wooden window frames. They certainly were not an improvement as the R & C tried to maintain.

So perhaps you could claim 85% - to 90% against tax, or ring your tax office for advise (not always a good idea). Remember you sign your tax return so the onus is on you.

Pennywise

It doesn't matter whether the expenditure was needed. The OP had no choice but to pay. Like for like replacements or "improvements" where it's today's standard (i.e. plastic double glazed windows instead of single pane wood framed) are expenses for tax purposes. The OP definitely should claim the expenditure under the "repairs" heading. Re-roofing, soffits etc are definitely allowable. The only vague area is the cladding - but if it was cladded before, then re-cladding is repairs not improvements. HMRC regard improvements as extensions, loft conversions, installation of central heating when there was only stand alone heating before. None of the list given by the OP sounds like true improvements - more a matter of updating the building to current standards. Claim it.

chrismac1

The UK tax code is more than 4 times longer than Germany's. Yes despite unification of East Germany and those monster German words which take up half a page, we've managed to come up with the lengthiest tax code of any major economy. This naturally means that much of the UK tax code is very poorly drafted with lots of scope for arguments and counter-arguments.

Fine. Let me outline the commercial approach to poorly drafted tax laws. As long as there is come sort of argument you can put forward, you are justified in claiming "shades of grey" aspects. You outline this to your client, you also outline the arguments we're going to run if the worst comes to the worst so we're both singing the same tune. The ball is then firmly in HMRC's Court to pick out that tax return as one of their 3% that tax year for the enquiry.

The alternative is to simply not claim anything that is a "shade of grey". When you dsicuss the "shades of grey" with clients, 95% plus of the time they want to go for it. That's because they are generally running small businesses which get no favours from the banks, local authorities and least of all HMRC.