Self Assessment - losses carried forward

jimmo

mustnotspend wrote: »

I've missed an opportunity to claim 10% W and T in 2010 for the immoveables?

No! No! No!

Was that really a mistype or a huge clue that you haven’t got to grips with the tax fundamentals?

You cannot claim a 10% wear and tear allowance on the immovable. End of.

Please humour me with this but when you say “
the 10% on contents can stand” you are right but do you know 10% of what?

Kynthia

Can I confirm that you let your property furnished? You can only claim the 10% Wear and Tear Allowance on furnished properties and therefore cannot deduct the cost of renewals of furnishings (items that aren't fixtures and fittings). Replacing fixtures and fittings is unrelated to the wear and tear allowance and you can still claim these. As you have stated, once you start one method you can't change to the other on that property.

mustnotspend

jimmo wrote: »

No! No! No!

Was that really a mistype or a huge clue that you haven’t got to grips with the tax fundamentals?

OOOOOOOPS. Yes a mistype. I meant moveable fixtures and fittings!!! Sorry!

jimmo wrote: »

Please humour me with this but when you say “
the 10% on contents can stand” you are right but do you know 10% of what?

Answer is 10% of net income received. Where Net means you've deducted any charges that you (ie landlord) pay that would generally be paid by the tenant e.g. council tax, rates... (I have none of these)

And YES it is a furnished property...

Thanks really appreciate the challenges!

nomunnofun

Perhaps I have misunderstood but it appears that you did not opt for the 10% Wear and Tear allowance in previous years. If I am correct, you cannot now so do in 2011/12.

mustnotspend

Ok here goes my conclusion...

　

jimmo wrote: »

However the key question is the state of the boiler at the commencement of the lettings business.
Did the lettings business acquire a knackered boiler in desperate need of replacement? No, it did work
Did it acquire an elderly boiler which was functioning perfectly adequately but then suddenly broke down and became a write off? Almost, see below..
Did the lettings business acquire an adequate boiler but believe that its age could be a big negative to the property’s appeal to prospective tenants? Yes, I guess
Normally, I would expect HMRC to look to challenge significant pre-letting expenditure on things like new boilers and bathrooms as being capital expenditure but in the OP’s case they would not do so because there is no tax at stake.They weren't pre-letting expenses… They were carried out 18month after the first tenants moved in...

　
Why I think that they're repairs and maintenance…
FTR, I owned the property and lived in it for 5 or so years before letting. I'm one of those accidental landlords, bought a one bed flat that I can't now get rid of (without taking a big hit) but that's another story. The boiler and bathroom expenditure happened about 18 months AFTER, I first started letting...

The boiler
The boiler was functional and gas safe when I started letting in 2009. However it was old and needed three interventions in the first year of rental. It also made loud popping sounds and although I was assured these were not dangerous, they disturbed / scared my tenants…The boiler engineer had said that it was on its last legs anyway and it would be a question of when, rather than if, it would need to be replaced... The boiler was changed to another basic boiler so I argue that any improvements in performance or capacity that arose where due to the replacement of old materials with newer but broadly equivalent materials…

Hence not a capital expense...


The bathroom
The bathroom was sort of functional when I started letting. However there were issues with the power shower (it worked intermittently), there were issues with all the taps and generally it looked bad.

The PIM 2020 says: "Repairs to reinstate a worn or dilapidated asset are usually deductible as revenue expenditure. The mere fact that the taxpayer bought the asset not long before the repairs are made does not in itself make the repair a capital expense." It carries on to describe instances where it would be capital. None of which apply...
　
It also gives this example:
"Even if the repairs are substantial, that does not of itself make them capital for tax purposes, provided the character of the asset remains unchanged. For example, if a fitted kitchen is refurbished the type of work carried out might include the stripping out and replacement of base units, wall units, sink etc., re-tiling, work top replacement, repairs to floor coverings and associated re-plastering and re-wiring. Provided the kitchen is replaced with a similar standard kitchen then this is a repair and the expenditure is allowable. "


I replaced basic with basic

It doesn't say anything (afaik) about when you do the repairs, how soon after you started letting, etc.

So my conclusion again is that these can stand as repairs...
　
Of course I'm happy for someone to tell me I'm wrong...

:mad:
　
　

mustnotspend

nomunnofun wrote: »

Perhaps I have misunderstood but it appears that you did not opt for the 10% Wear and Tear allowance in previous years. If I am correct, you cannot now so do in 2011/12.

True, I haven't opted for 10% WandT before. Nor have I claimed any replacement for moveable fixtures and fittings though. So I'm considering if I should resubmit 2010 / 2011...