Rental Income - Allowable Expenses - New Kitchen

Mahsroh

This query relates to my 17/18 tax return so not urgent.


99 times out of 100 I'm clear on what's classed as Capital Expenditure and what constitutes an allowable expense under the banner of "repairs and maintenance".


I'm satisfied that the kitchen units / worktops are an allowable expense. In terms of quality the old and the new are "like for like". New kitchen is Homebase Simply Hygena range so nothing earth shattering. It's a simple replacement of an old/worn kitchen with a new / fresh looking kitchen.


However, I've also disposed of an old free standing gas cooker and replaced with an integrated electric cooker / gas hob and (a completely new) extractor fan. In addition to that, I've had a sparky put in a new power supply to the cooker/extractor. Total cost for all appliances plus sparky & gas engineer costs circa £1000.00


I'm leaning towards this being a capital expenditure. The extractor fan in particular is "new" rather than replacement of existing, so I sure under HMRC rules that cant be claimed. The sparky costs are in theory an improvement as previously the only option was to install a gas cooker, and there was no option for an extractor fan. Cooker itself is more questionable as it is a replacement.... the fact the new one is integrated is irrelevant, isn't it?


With the extractor, on the flipside, a few months before the kitchen was fitted there were some issues with damp/condensation and one of the recommendations from the report was to install an extractor in the kitchen, so putting one in could potentially be classed as preventative maintenance? I know I'm probably scraping the barrel with that one!!


At the moment I'm leaning towards not putting any of it on my return, but if I'm wrong, it'll essentially cost me £400! Therefore, I'm intrigued to see what others think.

Mahsroh

With the number of views and no replies I'm guessing most people are thinking this is a grey area like me? I may speak to HMRC closer to the time to get their view, before submitting my return.

pjcox2005

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


This link may help particularly the section on repairs to let property.


I agree kitchen if no significant improvement should be a repair despite potentially being replaced in it's entirety. I'd say that the extractor fan, power supply and new cooker are capital.

Mahsroh

pjcox2005 wrote: »

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


This link may help particularly the section on repairs to let property.


I agree kitchen if no significant improvement should be a repair despite potentially being replaced in it's entirety. I'd say that the extractor fan, power supply and new cooker are capital.

Thanks. The more I look at it, the more I'm of the same view. The only bit I'm really unsure about is the cooker itself. Extractor fan and new power supply - yes. But the cooker is a replacement of an old asset with a modern equivalent though. I think that fact that it's integrated in lieu of free standing is irrelevant.

pjcox2005

For me it's the fact that you are replacing the whole asset in full, so it's not a repair of an asset but a disposal and subsequent acquisition of a cooker making it capital.

Mahsroh

pjcox2005 wrote: »

For me it's the fact that you are replacing the whole asset in full, so it's not a repair of an asset but a disposal and subsequent acquisition of a cooker making it capital.

My understanding is, if it's a new item (For example, I purchased a dishwasher, where the tenants didn't previously have one available to them) then it's not allowable, and is capital, but if it's the replacement of an existing appliance then it is. The following extract is taken from HMRC's guidance:


"If you let out residential property (a dwelling house) you may be able to claim a deduction for the cost of replacing domestic items such as:

• movable furniture for example beds, free-standing wardrobes
• furnishings for example curtains, linens, carpets, floor coverings
• household appliances for example televisions, fridges, freezers
• kitchenware for example crockery, cutlery"

I believe this is a new thing from April 2016 onwards and was bought in after they scrapped the "wear and tear" allowance, but DOES apply to all properties, whether unfurnished, part furnished or fully furnished....Further guidance from HMRC here:


"Unlike the Wear and Tear allowance, for the Replacement of Domestic Items relief to apply the dwelling house can be unfurnished, part furnished or fully furnished. However, an expense must actually be incurred on purchasing a replacement domestic item, ‘the new item’.
The new item must also be solely provided for use by the tenants in a dwelling house and the old item must no longer be available for use in that dwelling house.
The initial cost of purchasing domestic items for a dwelling house isn’t a deductible expense so no relief is available for these costs. Relief is only available for the replacement item."

00ec25

Mahsroh wrote: »

Thanks. The more I look at it, the more I'm of the same view. The only bit I'm really unsure about is the cooker itself. Extractor fan and new power supply - yes. But the cooker is a replacement of an old asset with a modern equivalent though. I think that fact that it's integrated in lieu of free standing is irrelevant.

I would agree with your view: cooker = revenue cost,
Extractor fan and new power supply = capital cost

after all Pim2020 almost describes it word for word, and has itself evolved over the years as evidenced by HMRC now accepting single glazed to double glazed is a technological standard rather than, as they used to say, an improvement. So as you say, the renewals rule (which is not new, it's just most people claimed wear and tear instead) should cover your cooker argument nicely.