Spray foam insulation removal tax position

tarves57

I have a small flat that I rent out. When my tenant left, I thought I might as well sell it as I'm getting too old to fix/clean/paint the place every time a tenant leaves, plus now that I'm getting my state pension I would be paying most of what I earn in rent (after expenses) in tax, so why have all the hassle....

The home report came back as nigh on perfect but I was told that because there is spray foam insulation in the attic, the flat would be unmortgageable and the best idea would be to get rid of the foam, otherwise I would have to sell as cash only and probably not for anything near the valuation.

I've had one quote of 5k to remove it so far which I think is high (the flat is only 45 sq m).

If I decided to rent it out for a couple more years, would the cost of foam removal be deductible from the rental income? 

Any advice would be helpful.

EssexHebridean

This is a leasehold flat, so first thing to confirm is that your lease shows that the loft is part of your property, and that you have a right to take unilateral action in connection with the roof itself. If not, then you will need to speak with your freeholder before doing anything. 

eddddy

You mention getting a Home Report prior to selling.

That sounds like Scotland. If so, it almost certainly won't be leasehold.

user1977

eddddy said:

You mention getting a Home Report prior to selling.

That sounds like Scotland. If so, it almost certainly won't be leasehold.

Though the question remains whether the foam is solely the OP's responsibility, given that the roof itself will almost invariabily be the common property of all the flats.

tarves57

EssexHebridean said:

This is a leasehold flat, so first thing to confirm is that your lease shows that the loft is part of your property, and that you have a right to take unilateral action in connection with the roof itself. If not, then you will need to speak with your freeholder before doing anything. 

   Sorry, should have said, flat is in Scotland so no such complications. My problem isn't with whether I can do it or not, but simply wondering whether I can recoup some of the expense of removing the spray foam by using it as an revenue expense against the tax I'll have to pay on the rental income.

tarves57

user1977 said:

Though the question remains whether the foam is solely the OP's responsibility, given that the roof itself will almost invariabily be the common property of all the flats.

The spray foam was installed by the previous owner of my flat. The attic is mine. Roof repairs are shared but in any case no-one lives in the flat below. It's been uninhabited for years my neighbours tell me. 

I accept it as my responsibility as I bought it in that state (thinking that spray foam insulation was a good thing!).

The Scottish Gov were going to impose a minimum EPC rating of C for rental properties after 2028. Of course they have now changed their minds and this isn't the rule anymore.

_Penny_Dreadful

tarves57 said:

EssexHebridean said:

This is a leasehold flat, so first thing to confirm is that your lease shows that the loft is part of your property, and that you have a right to take unilateral action in connection with the roof itself. If not, then you will need to speak with your freeholder before doing anything. 

   Sorry, should have said, flat is in Scotland so no such complications. My problem isn't with whether I can do it or not, but simply wondering whether I can recoup some of the expense of removing the spray foam by using it as an revenue expense against the tax I'll have to pay on the rental income.

The expense of removing the spray foam is not an expense incurred wholly and exclusively for the purposes of letting the property so I don’t see how you could legitimately offset it against the rental income. If it were not for the fact you want to sell the property you wouldn’t be considering removing the spray foam insulation at all. 

tarves57

_Penny_Dreadful said:

tarves57 said:

EssexHebridean said:

This is a leasehold flat, so first thing to confirm is that your lease shows that the loft is part of your property, and that you have a right to take unilateral action in connection with the roof itself. If not, then you will need to speak with your freeholder before doing anything. 

   Sorry, should have said, flat is in Scotland so no such complications. My problem isn't with whether I can do it or not, but simply wondering whether I can recoup some of the expense of removing the spray foam by using it as an revenue expense against the tax I'll have to pay on the rental income.

The expense of removing the spray foam is not an expense incurred wholly and exclusively for the purposes of letting the property so I don’t see how you could legitimately offset it against the rental income. If it were not for the fact you want to sell the property you wouldn’t be considering removing the spray foam insulation at all. 

That's true. So probably not. It's really frustrating that I have to remove a perfectly good, certified product that the government were handing out grants for until recently, because mortgage providers can't make up their minds whether it's safe or not. I've been told they go by RICS regulations which in the case of spray foam is more guidance than a hard and fast rule. (As I've understood it anyway).

_Penny_Dreadful

tarves57 said:

_Penny_Dreadful said:

tarves57 said:

EssexHebridean said:

This is a leasehold flat, so first thing to confirm is that your lease shows that the loft is part of your property, and that you have a right to take unilateral action in connection with the roof itself. If not, then you will need to speak with your freeholder before doing anything. 

   Sorry, should have said, flat is in Scotland so no such complications. My problem isn't with whether I can do it or not, but simply wondering whether I can recoup some of the expense of removing the spray foam by using it as an revenue expense against the tax I'll have to pay on the rental income.

The expense of removing the spray foam is not an expense incurred wholly and exclusively for the purposes of letting the property so I don’t see how you could legitimately offset it against the rental income. If it were not for the fact you want to sell the property you wouldn’t be considering removing the spray foam insulation at all. 

That's true. So probably not. It's really frustrating that I have to remove a perfectly good, certified product that the government were handing out grants for until recently, because mortgage providers can't make up their minds whether it's safe or not. I've been told they go by RICS regulations which in the case of spray foam is more guidance than a hard and fast rule. (As I've understood it anyway).

As the removal of the foam would increase the value of the property, or at least make it mortgageable, it could perhaps be classified as a capital expense when calculating your CGT liability when you come to sell. 

I found this on the Scottish Parliament’s Information Centre. I’m not sure if it’s of any use to you. 

 

To prevent any issues with lenders and surveyors, RICS recommends that homeowners opting to install spray foam keep all documentation, for example independent test certificates, and contract and guarantees from the installer. It also recommends those buying a spray foam insulated property to ensure that this paperwork is available.

https://spice-spotlight.scot/2023/11/16/the-use-of-spray-foam-insulation-in-scotland/

tarves57

Thanks.

I do have all the paperwork, and yet......

The way the estate agent was acting, it was like I had an unexploded b*mb in the attic. Maybe I should look for a better estate agent. lol

As I overpaid for the flat (cue the cruel Scottish "offers over" system) I'm unlikely to have any profit so CGT doesn't come into it.

Never mind, lessons learnt. There are a lot worse problems that people have to deal with.

user1977

tarves57 said:

As I overpaid for the flat (cue the cruel Scottish "offers over" system) I'm unlikely to have any profit 

Are you planning to sell under a less cruel system?