Storage costs allowable re rented property?

WHA wrote:

In this case, I can't see why the removal and storage of your contents is anything at all to do with the lettings "business"

I'm happy to be corrected by the relevant case law, but I would suggest that it is not for the Inspector to decide what assets are injected into a Letting business when an individual sets one up. As you say if the advert was that the property was furnished, then the Inspector has to answer 'what with', if not with the property that was put in storage once the tenant asked for an unfurnished let.

In my view the letting business consists of the house and the furniture and therefore the expenditure is 'wholly and exclusively' for the purposes of the business and therefore allowable. In this case there is a clear separation between personal effects and furniture for the business (or at least I hope there is! )

Certainly that is the argument I would push.

NeilW

Incidentally my policy over many years of experience in similar cases has been to claim the 10% wear & tear allowance AS WELL. The rationale may be puzzling if the furniture is stored but in almost all cases the landlord will still be paying for insuring contents (implying there are some contents there) and the landlord will still have contents such as carpets, curtains, bathroom cabinets and kitchen accessories as well as a washing machine and dishwasher. I think bearing in mind what HMRCs manual says about the W & T allowance that there is a good case for this too...

I also return to my original point that UK tax is irrelevant if it is creditable against the tax liability where you live...

I do not agree that the allowance is not due, take acccount of HMRCs own internal Property Income Manual, in particular the last paragraph of PIM3200 http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm

I would certainly claim this, there is nothing to stop you repairing the return today if you are in time or claiming error or mistake relief for the past 5 years if need be...

I would suggest that you read the words of the Concession, as against the internal Manual. Neither are statutory, so the Revenue could deny the claim but on the weight of the final sentence of the Manual Concession B47 should apply. You do have furnishings, so I do not think it up to an individual interpreter of the Concession who elaborated the text when he/she wrote an internal Manual to go above and beyond the wording. I have cut and pasted it here:

B47: Furnished lettings of dwelling houses: wear and tear of furniture


1 CAA 2001 ss 15(3), 35(2) (formerly CAA 1990 ss 28A(3), 61(2)) specifically exclude a claim for capital allowances on plant or machinery let for use in a dwelling house. Accordingly, capital allowances are not due on furniture and furnishings where the income from letting of furnished houses is assessable under Schedule A (or Schedule D Case VI, for income tax cases up to 1994/95 and periods before 1 April 1988 for corporation tax) and is outside the scope of TA 1988 s 503 (furnished holiday lettings).

2 In practice, an allowance for wear and tear may be made, where capital allowances are not due, by deducting 10 per cent of the net rent received. For this purpose the rent is reduced by any part of the occupier’s council tax and water rates which the landlord pays. If the rental includes payments for services which would normally be borne by a tenant and the amounts involved are material, these too should be subtracted before calculating the 10 per cent deduction.

3 Where the 10 per cent deduction is allowed, no further deduction is given for the cost of renewing furniture or furnishings, including suites, beds, carpets, curtains, linen, crockery, or cutlery. Nor is a further deduction allowed for chattels of a type which, in unfurnished accommodation, a tenant would normally provide for himself (for example, cookers, washing machines, dishwashers).

4 However, in addition to the 10 per cent allowance, the landlord can also claim the cost of renewing fixtures which are an integral part of the buildings, and which are revenue repairs to the fabric. These are fixtures which would not normally be removed by either tenant or owner if the property were vacated or sold (for example, baths, washbasins, toilets). Expenditure on renewing such items may be treated as expenditure on repairs even though the 10 per cent allowance has been claimed.

5 As an alternative to the 10 per cent allowance, the actual cost of renewing furniture, furnishings and chattels may be claimed as a deduction. The amount to be allowed is the actual cost of the replacements excluding any additions or improvements, and after deducting the scrap value or sale price of the items replaced. The cost of the original items is not expenditure on renewals and is not allowable.

6 Whichever basis a taxpayer chooses to adopt should be consistently applied to all furnished properties rented out.

7 Before 1975/76, when the 10 per cent basis started, there were several bases in common use. The Revenue will not disturb these so long as the let properties remain in the same ownership. Any properties acquired subsequently should be dealt with on one of the two bases described above.