Spray foam insulation removal tax position

tarves57

user1977 said:

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?

Just being facetious.... The system has its pros and cons. 

AlexMac

Aaa

Returning to your original post; is this OK to offset against tax…

I’d say it has to be? The only Q is capital or revenue? 

Dahn ‘ere in England, HMRC offer all sorts of helpful advice, on their web pages and in offers of online seminars, on precise detail of 

- what constitutes allowable revenue expenses to be offset against rental income in your annual self assessment return, and

- capital improvements to be set against CGT when you eventually sell. 

But although I meticulously report income and only offset receipted expenses, I’ve never been that forensic about the fine line between like-for-like “Repairs and Replacements” and enhancing “Capital improvements“

After all, when I ripped out a leaky 30 year old bathroom and replaced it with a modern shower and khazi, which was it? So I stuck it into my annual return as R&R and just got 20% relief as I’m a basic rate taxpayer. if I’d had more than £50k-odd income pa , it would have been more advantageous to claim annually as I’d have been on a higher tax band

But when I renewed a complete kitchen at about £10k before a rental started, I logged it for when I eventually sell. At current rates, that will mean 24% relief. And, when I eventually sell, £2.4k relief will be worth a lot less in real terms due to inflation. Although arguably and unless I’d installed platinum plating it was repairs and replacement; a kitchen is a kitchen?

I’m not sure the taxwomen or taxmen care that much about small fry like us? When I sold a holiday home a few years ago and luckily benefited from decent Capital Gains, I just declared the cost of capital improvements on the HMRC online form; no one even asked for evidence. And in 25 years of submitting returns as a small landlord of two rental flats, I’ve never been audited or challenged (although it’s probably obvious, if any human even looked at my online returns, that they’re honest)

So your choice; if you wanna sell now, just bung the £5k costs in as Capital. Or let it for another year or two and call it expenses.   I doubt the Government cares unless you’re trying an obvious fiddle?

tarves57

Thanks. Someone with common sense.... 

I too, report income meticulously and collect all receipts.

If I am unsure where to place an expense I read the HMRC rules, but they're sometimes open to interpretation so I try to make a common sense decision and stick with it.  However I'm always hoping there is a clear rule that fits the situation exactly or that someone else has been in the same situation, hence my question in this forum. 

eddddy

tarves57 said:

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).

FWIW, I'm not sure if you understand the issue with sprayfoam.


The issue is that if a leak develops in the roof (maybe due to cracked tile), rain water could leak into the roof timbers. 

• If the roof timbers are encased in sprayfoam,  the moisture cannot evaporate, so the timbers stay damp/wet, and are more likely to rot.

• And because the timbers are covered in sprayfoam, nobody can see that the timbers are damp and rotting. So nobody realises the roof is leaking, so nobody fixes the roof, and the timber rot continues to spread

• So the first clue there's a problem is when the roof starts sagging. By this time, it has become a very expensive problem to fix.

If your roof never develops a leak, there shouldn't be a problem.

I guess when people started using sprayfoam, they didn't foresee this problem.

kKev

Good afternoon. We're thinking of buying a property which has sprayfoam insulation. The vendor has the documents from the installation Inc, guarantee which is insurance backed, invoice/ receipt, product info and installer details. 
The product is Lapolla open cell. 
The installer is Protec Insulation Services. 
It was paid for by the Green Homes Grant scheme. 
Apparently Lapolla has ceased trading. 
Protec's website is unobtainable,  their various telephone numbers are not in service. The Lapolla foam has a BBA certificate reference. When I've contacted BBA they say the certificate is withdrawn. 
The roof is in good condition and the sprayfoam doesn't worry me as such, but I'm concerned about any future sale either by us or by our sons after us.

eddddy

kKev said:

Good afternoon. We're thinking of buying a property which has sprayfoam insulation. The vendor has the documents from the installation Inc, guarantee which is insurance backed, invoice/ receipt, product info and installer details. 
The product is Lapolla open cell. 
The installer is Protec Insulation Services. 
It was paid for by the Green Homes Grant scheme. 
Apparently Lapolla has ceased trading. 
Protec's website is unobtainable,  their various telephone numbers are not in service. The Lapolla foam has a BBA certificate reference. When I've contacted BBA they say the certificate is withdrawn. 
The roof is in good condition and the sprayfoam doesn't worry me as such, but I'm concerned about any future sale either by us or by our sons after us.

Last time I checked this out (about 18 months ago), no mortgage lender would lend on a house with spray foam insulation.

The mortgage lenders insisted on it being removed, before they would lend.

So, unless mortgage lenders change their policy on this, you will probably have difficulty re-selling.


If you're not buying with a mortgage, maybe you could negotiate a good price (because of the spray foam), then get it removed after you buy - and make a bit of a profit (on paper).

But obviously if you do that, you might find some rot in the timbers, which might be expensive to deal with.

FreeBear

eddddy said: Last time I checked this out (about 18 months ago), no mortgage lender would lend on a house with spray foam insulation.

I believe there are a few lenders that will provide a mortgage on a property with spray foam insulation. It is not a situation I've had to face, so can't say which lenders will.

@kKev If you look at the insurance policy alongside the warranty, you'll probably find both to be so full of cop-out clauses as to render the documents worthless. On top of that, there would probably be a fee to pay to have the warranty transferred to yourself. Oh, and it makes little difference if it is open or closed cell foam - Both are equally as bad for trapping moisture in the roof timbers (open cell will contain ~5% of closed cell and have a "skin" on top).

Albermarle

kKev said:

Good afternoon. We're thinking of buying a property which has sprayfoam insulation. The vendor has the documents from the installation Inc, guarantee which is insurance backed, invoice/ receipt, product info and installer details. 
The product is Lapolla open cell. 
The installer is Protec Insulation Services. 
It was paid for by the Green Homes Grant scheme. 
Apparently Lapolla has ceased trading. 
Protec's website is unobtainable,  their various telephone numbers are not in service. The Lapolla foam has a BBA certificate reference. When I've contacted BBA they say the certificate is withdrawn. 
The roof is in good condition and the sprayfoam doesn't worry me as such, but I'm concerned about any future sale either by us or by our sons after us.

The answers above assume the sprayfoam has been installed under the roof itself, which is where it usually is and where it can cause problems.
If it was elsewhere, such as inbetween the joists on the floor of the roof space, it is less of an issue I think.
AFAIK some new build houses use it in certain areas without any issues.

Bookworm225

tarves57 said:

Thanks. Someone with common sense.... 

I too, report income meticulously and collect all receipts.

If I am unsure where to place an expense I read the HMRC rules, but they're sometimes open to interpretation so I try to make a common sense decision and stick with it.  However I'm always hoping there is a clear rule that fits the situation exactly or that someone else has been in the same situation, hence my question in this forum. 

re the tax position, 
it is not a "repair" against rental income as the rental business has ceased 

however, it is probably a valid cost against CGT as it is a cost incurred in preparing the property for sale. It is pushing it a bit to claim it is an "incidental" cost of the sale, but I do think it would be reasonable to claim it is a capital cost 

work your way through this lot for the underlying principles
BIM90000 - Post-cessation receipts and expenses: contents - HMRC internal manual - GOV.UK

Olinda99

I agree with bookworm - if the rental business was still running you could have got away with claiming it as a repair expense against rental income

you will now have to claim it against cgt - the worst that can happen is that they disallow it.