Tax Relief on Buy to Let Property Repairs

Pav

I've looked online but can't seem to find the information I require, hoping someone can help. 

My wife and I have a buy to let flat in Scotland , we pay tax on the rental profit via PAYE (our tax codes were altered to reflect the rental profit when we got the flat)
Up until now, other than the usual boiler servicing and some minor decorating , we have not had to spend any money on the flat however we now require a new boiler and a neighbour in the block has identified some roof repairs which need done. 

My question is that for these large outlays (boiler and roof) am I right in thinking I can obtain a refund of the VAT paid? If so how do I go about this? 
Or is it a case of keeping the receipts and claiming the refund from the capital gains tax when we eventually sell the flat?

Any help much appreciated

user1977

Pav said:

My question is that for these large outlays (boiler and roof) am I right in thinking I can obtain a refund of the VAT paid?

That's easy - no, you're wrong. Which is probably why you can't find anything about it online.

GDB2222

I'm astonished that the OP doesn’t have to fill out an annual tax return, showing the actual profit.  

K_S

Pav said:

I've looked online but can't seem to find the information I require, hoping someone can help. 

My wife and I have a buy to let flat in Scotland , we pay tax on the rental profit via PAYE (our tax codes were altered to reflect the rental profit when we got the flat)
Up until now, other than the usual boiler servicing and some minor decorating , we have not had to spend any money on the flat however we now require a new boiler and a neighbour in the block has identified some roof repairs which need done. 

My question is that for these large outlays (boiler and roof) am I right in thinking I can obtain a refund of the VAT paid? If so how do I go about this? 
Or is it a case of keeping the receipts and claiming the refund from the capital gains tax when we eventually sell the flat?

Any help much appreciated

@pav You can't claim a refund of VAT unless you are VAT-registered yourself which I'm assuming you are not.

In most cases, replacing the boiler and roof repairs should both be revenue expenses (will go under "Repairs and maintenance" in your property income section), and so will reduce your profit and get you tax-relief. Not exactly sure how it works if you're paying through your PAYE tax code.

It's important to note that to qualify as a revenue-expense (as opposed to capital-expense) the boiler replacement needs to be like-for-like, while allowing for technological and efficiency advances.

diystarter7

Not sure re scotland but here in England you can claim for:

Repairs but not improvments.  EG replacing a boiler if old is beyond economical repair but I guess the boiler will be an improvement but you can still claim  A roof, windows almost anything I thik as long as its not an improvement EG an extension, lol.

Then in England come to sell you can use the costs to offset any CGT

Slithery

Pav said:

My question is that for these large outlays (boiler and roof) am I right in thinking I can obtain a refund of the VAT paid?

Only if the property is owned by a VAT registered company.

diystarter7 said:

Not sure re scotland but here in England you can claim for:

Repairs but not improvments.

You can offset the costs against your tax return, but this has nothing to do with VAT.

Marcus-H_2

You can only reclaim VAT on a full house refurbishment or build. It is not as simple as that, as you can only use builders who are members of the approved scheme - who are likely to charge more anyway.

If the Tennant is on benefits, then maybe they can claim something for you, through ECO3 or ECO4 funding? Also, don't forget that Scotland has the interest free loan green scheme if you can put it renewables as a replacement.

TripleH

But don't you need to be VAT registered still to reclaim it?

Also are there not knock on effects as well when you sell? I can't think it's as simple as registering for VAT, have work done then deregister as that would seem a great way of 'avoiding' paying VAT and am sure HMRC would have thought of this?

Olinda99

Boiler repairs go against rental income. New boiler goes against cgt when you sell.

simon_or

Olinda99 said:

Boiler repairs go against rental income. New boiler goes against cgt when you sell.

It's not that black and white.

The taxman is fine with replacing older equipment for the equivalent modern version counting as a repair, eg: replacing a 20 year gas boiler that's beyond repair with a modern gas boiler.

If you replaced an old back boiler with a modern combi boiler, that would be an enhancement and hence a capital expense.

Where arguments can be made both ways, my accountant's advice is usually to put it down as a revenue expense.

The likelihood of HMRC putting in the resources to challenge a 50-50 revenue/capital distinction of a few thousand pounds on a domestic property is negligible.

Dazed_and_C0nfused

GDB2222 said:

I'm astonished that the OP doesn’t have to fill out an annual tax return, showing the actual profit.  

I suspect the op means that they have a tax code deduction to collect some extra tax during the year and then complete a Self Assessment return to finalise things and avoid a large(r) bill under Self Assessment.

But if not I'm sure HMRC will be asking for returns to be completed once they appreciate the level of rental income/expenses.