Allowable expense – selling and buying Buy-to-let

mammon

My job has a tied house with it where we live.

We own one house which we have rented out for a number of years. Last year we sold the house and then bought a house closer to us to rent out. Because our intention was to sell one rental property and buy another one, and because we did this within a year, HMRC will treat the rental of this new house as a continuation of the same business as the rental of the previous house (hence we can carry forward losses etc.).

My question relates to what expense we will be able to offset against income.

In the old house, after the tenant moved out, I replaced a broken fence, travelled to the property (a journey of over 100 miles) on a few occasions for the sole purpose of maintenance (garden, fence etc.) all before selling. Are these allowable business expenses?

In the new house, after purchasing but before renting, an electrical inspection revealed £1500 of remedial work before an EICR could be issued. Is this £1500 an allowable business expense?

Any thoughts please? thanks

Smi1er

Mileage is allowable @ 45p per mile.

You didn't need a EICR but it too is allowable

tlc678910

Hi
I think that the £1500 for the new property electrical work would be a capital expense that could be deducted from a capital gain in the sale of the property but not an allowable deduction as maintenance on the self assessment tax return as you are getting the property ready for letting and not maintaining it during letting but I'm interested to hear if I'm wrong! (probably so just a point for discussion).

I'm assuming you hold the house as individuals and it is not actually an official business.

00ec25

since you already have (in writing???) HMRC acceptance that the rental business continues, the expenses you list in repsect of the OLD house would have been treated as revenue expenditure had you continued letting the same property, therefore they are eligible costs against income tax

of course that may not be what you wanted if you'd have preferred them to be offset against your CGT, but hey ho, you can't pick and choose. They are revenue costs against your profit subject to income tax

as for the NEW house, the position requires further info. if we take as read that the rental business is continuing
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2510

the rules associated with "pre trading" expenditure are irrelevant since the trade is already underway. Therefore the question whether the electrical works are capital or revenue comes down to the details of the work performed and why it was deemed necessary. As such it is covered by the principles set out here:
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2020

there is no simple tick list revenue v capital. It is based on subjective assessment of is there an element of improvement or not. Replacing a part of the wiring would be a revenue repair and it is no different to the example given about a new roof is but a part of a house, so is a repair, even if it is a "new" roof. Installing a new circuit that was not there before would on the other hand be a capital improvement. The extent of one v the other is part of the overall balance of all, some, or none is revenue

however, pay particular attention to the caveat regarding "fit state", hence the need to be clear on the nature of works undertaken:
"A property acquired that wasn't in a fit state for use in the business until the repairs had been carried out or that couldn't continue to be let without repairs being made shortly after acquisition."
see here:
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030

as you can see, no one can give you a yes / no answer. It will be an assessment which you need to make yourself as you are the one with the full facts, not us, and you need to be prepared to defend your justification if (unlikely) HMRC ever come calling