Roof Replacement and Windows & Linteks Replacement

Brightfox78

Hi,

I own a rental flat in a block of 10. The whole of the block is undergoing extensive works under a section 20. The cost of the works will be about £200K .

The block management company is therefore charging every leaseholder £20K each,for replacing the roof, new lintels and new windows.

Can I offset the above £20K expense, against my Capital Gains Tax liability when I come to sell the flat ?

Bookworm105

it is either a revenue cost or capital cost
if you are looking to argue it is revenue then assess the totality of the works being done against the "entirety" rules
BIM46910 - Specific deductions: repairs and renewals: what is a repair: the ‘entirety’ - HMRC internal manual - GOV.UK (www.gov.uk)

BIM35480 - Capital/revenue divide: tangible assets: case law: modernising a property - HMRC internal manual - GOV.UK (www.gov.uk)

assuming you yourself do not live in the block then that looks like 100% revenue costs (repairs), not capital expenditure/

GDB2222

Although the entire roof is being replaced, that’s only a part of the building? I assume that there must be a lot of cases on this?  

uknick

The general rule for major structural works is, if you're going to extend the life of the building then it's capital.  If not, it's revenue.

As said there is plenty of case law on this but the two main cases relate to Odeon Cinemas and a ship.

Odeon Cinemas claimed the cost of repairs to cinemas they'd refurbished back in the 1940/50s as an expense.  When challenged by the tax office, the Court felt the refurbishments made were not to make the cinema useable, but were actually routine maintenance works. They were also satisfied the price Odeon paid for the cinemas was not significantly lower because of the condition they were in. Therefore the Odeon cinemas repairs were judged to be allowable expenses.

The second case involving the ship went the other way.  The ship was not deemed seaworthy at time of purchase. When the ship was repaired the owners wanted the spend to be treated as revenue.  The Court pointed out the ship was clearly not fit for use, and the repairs were necessary before it could be used or sold. Therefore the cost of the repairs was capital expenditure, included as part of the cost of the purchase of the ship, and subsequently not allowable as an expense.