split between capital and repairs on a refurbished BTL

silvercar

House bought which needed extensive refurbishment before being let. Broadly the refurbishment included:

a) replacing windows with double glazing.
b) replacing boiler
c) rewiring in places
d) adding some internal walls
e) replacing existing bathroom
f) adding en-suites to 2 rooms.
g) replastering, painting and recarpeting
h) new furnishings

If relevant to the tax situation, the house is (and was) registered as an HMO. It was bought by a limited company that was previously trading, though the trading has now ceased. The company also bought a second property in the midst of the refurbishing work on the first property, that was bought with tenants in situ. (So the company was renting out a property while the work was going on).

I'm trying to establish what expenditure would count as maintenance/ repairs and what would be 'capital' to count against future CGT.

My initial view is that all except (f) the new en-suites are repair/ maintenance issues. New rules mean that (h) also counts as occurring when the cost is made.

I'm particularly unsure on the new walls, as some created more rooms but others just moved thing?

Any views appreciated.

HappyMJ

silvercar wrote: »

House bought which needed extensive refurbishment before being let. Broadly the refurbishment included:

a) replacing windows with double glazing.
b) replacing boiler
c) rewiring in places
d) adding some internal walls
e) replacing existing bathroom
f) adding en-suites to 2 rooms.
g) replastering, painting and recarpeting
h) new furnishings

If relevant to the tax situation, the house is (and was) registered as an HMO. It was bought by a limited company that was previously trading, though the trading has now ceased. The company also bought a second property in the midst of the refurbishing work on the first property, that was bought with tenants in situ. (So the company was renting out a property while the work was going on).

I'm trying to establish what expenditure would count as maintenance/ repairs and what would be 'capital' to count against future CGT.

My initial view is that all except (f) the new en-suites are repair/ maintenance issues. New rules mean that (h) also counts as occurring when the cost is made.

I'm particularly unsure on the new walls, as some created more rooms but others just moved thing?

Any views appreciated.

I would agree with your assessment.

Generally replacement counts as repairs and maintenance and something new that did not exist before counts as capital...but that's not a hard and fast rule.

If you didn't create any new floor area I would count that as maintenance even though you may have created 2 smaller rooms out of a larger one.

Pennywise

Depends on the state of the building when you bought it.

"the cost of refurbishing or repairing a property bought in a derelict or run-down state,"

Is capital as per HMRC property income manual PIM2020

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2020

So it may be that very little (if any) of those costs are allowable as repairs if the property was derelict or run down when you bought it. The rationale is that you'd have paid far less for it in a run-down state than you would if it had been habitable, so the costs of making it habitable are capital, not repairs.

silvercar

Pennywise wrote: »

Depends on the state of the building when you bought it.

"the cost of refurbishing or repairing a property bought in a derelict or run-down state,"

Is capital as per HMRC property income manual PIM2020

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2020

So it may be that very little (if any) of those costs are allowable as repairs if the property was derelict or run down when you bought it. The rationale is that you'd have paid far less for it in a run-down state than you would if it had been habitable, so the costs of making it habitable are capital, not repairs.

Good point to make.

In this case, it wasn't that dilapidated. It was tenanted, so met current standards etc Also, we didn't need to change the kitchen for example. It also wasn't sold at a particularly low price.