2015 fully furnished tax allowance 10% or actual cost.

dobymicks

Hi

I bought a fully furnished flat in Feb 2015, the furniture was negotiated as part of the purchase price.
The tenant left so I got it with vacant possession.
In the end we had to replace quite a bit of this prior to letting it out including a new oven, hob, fridge freezer, sofa and mattresses.

My accountant is saying I can only claim 10% of rent received in that tax year which works out 10% of one months rent = £60 total.
The next year he is saying that the rules changed and I can no longer claim 10%, I can only claim what I spent. which is zero.

So I end up with £60 relief and have laid out close on £2,500

So the question is: in February 2015 was 10% the only option or did/do I have an option to claim differently.

Many thanks.

Bluebirdman_of_Alcathays

in Feb 2015, your tax return should have been submitted in January this year - are you sure your dates are correct?

You accountant is wrong - for 14/15 and 15/16, you had the option of EITHER 10% W&T OR full cost. You were not allowed to swap and change - once you had a method, you had to stick to it.

From April 2016 onwards, it is full cost only.

However, what your accountant may be getting at, is that these costs are not allowable against income, rather that they are allowable against any capital gains? Very broadly speaking, if you purchase something long term, it is a capital expense, and if you replace something, it is revenue.

http://www.thompsonspropertytax.co.uk/capital-v-revenue-expenses-on-repairs-in-a-property-business

It gets complex - I would ask your accountant to clarify exactly what he means based on what I've said above.

dobymicks

Thank you Bluebirdman (Donald?)

Yes I am late with the returns, my rental income is now being submitted under some late submission scheme.

The accountant has made it very clear that the 10% option was compulsory in 14/15 which I did question and said I thought it was optional.

I can't find any links to this information to show to my accountant, do you know of any?

Thanks

dobymicks

I have found this that seems to indicate my accountant is correct:



Post April 2013 rules
The ‘Enactment of Extra Statutory Concessions Order 2011, s 11’ withdrew the ‘renewals basis ’ under ESC B47 as from 6 April 2013 and placed the ‘Wear and Tear’ allowance on a statutory basis such that unfurnished lettings could no longer claim and furnished lettings no longer had the choice, they had to claim the 10% ‘Wear and Tear’. Fine if the items being purchased totaled less than the 10% amount but restrictive if the item (s) were greater. The problem was further exacerbated with the withdrawal of ESC B1 which dealt with the consequences of voluntarily switching from the non-statutory ‘Wear and Tear’ allowance to the statutory basis of relief.

booksurr

dobymicks wrote: »

The accountant has made it very clear that the 10% option was compulsory in 14/15 which I did question and said I thought it was optional.

I can't find any links to this information to show to my accountant, do you know of any?

your accountant is 100% correct

the "renewals basis" was withdrawn on and after 6 April 2013. This intention had been widely publicised from 2011 onwards in the technical accounting press.
https://www.tolley.co.uk/knowledge-centre/knowledge/rental-property-and-the-renewals-basis-an-update/Rental-properties-renewal-basis-Social.pdf

Only the 10% wear and tear was left available. Now, in a classic case of swings and roundabouts, the situation has been reversed with "son of" the renewals basis being the only method available from April 2016 as the wear and tear allowance has now been abolished. Just as well since, as per the article above, some people were gearing up for test cases over white goods and plant and machinery and "trade tools" definitions which would have been a big can of worms given HMRC's stance that letting is not in itself a trade, it is an investment activity. If HMRC lost that one the waves would be rather big.

However, even if the renewals basis had been available to you in 14/15 I doubt you could have used it safely as your scenario is somewhat grey. Yes you say purchased certain fittings as part of the building and that you "replaced" them before the letting commenced, but therein would like your problem since you cannot claim the cost of items purchased for the first time before the letting commences, only those you replace whilst the letting is underway.

Focus on getting your return submitted and don't worry over the fact you cannot claim the renewals basis for that year as i suspect you would have had an argument anyway if HMRC had checked up on you.

dobymicks

Thank you booksurr

Could I ask if I can claim for the replacement of built-in white goods on both furnished and unfurnished properties.
All my rental properties have been purchased post Feb 2015.