Replacing Boiler in our Rented Property

HelgaWard

Registered User
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3
Hi,
We own and rent out a house. We got the gas boiler serviced at the weekend, and the guy doing the service advised that some part is likely to fail soon, and probably wouldn't be worth replacing. (Boiler is about 18 years old) I was wondering if it possible to deduct the cost of a replacement boiler from tax due?
I think it is a bit of a grey area. As it it could be seen as a capital investment, but at the same time I won't be replacing with an improved system, zoned heating etc, I will be just replacing the existing (nearly kaputt) gas boiler with a new working version?
Thanks.
 
Boilers would not be capital, they need replacing every decade or so. So it's a repair and that's what my accountant told me I could put it down as.
 
wow, very surprised at that advice. I would have thought that a boiler replacement is a capital item not a repair. A repair maintains, a capital item extends.

Do you have that advice in writing to protect yourself?
 
Despite what many posters think may questions like this do not have a simple black and white answer.

Revenue defines a number of categories into which an item of expenditure may fall. Under the self assessment system, it is up to you (or your accountant) to decide which category any given item will fall. If Revenue do a tax audit they may accept your decision or challenge it. While many items are clear-cut there is no guarantee in advance that your decision will be acceptable to Revenue.

I would disagree with Bronte above, (a first !) I would see a new boiler as a capital item and claim for it under the wear and tear allowance. It doesn't seem reasonable to me that a new boiler could be classified as a repair.

But that is just my opinion, however Bronte has just her accountants opinion to go on, which in tax law is worth the same as the opinion of an anonymous poster on AAM i.e. nothing. The taxpayer signs the return, the Revenue accepts or does not, everything is commenting from the sidelines.
 
Thanks Bronte, can find discussions where people argue both sides online, would be hoping that your thinking is correct. Maybe I should ring revenue and seek clarification from them?
 
wow, very surprised at that advice. I would have thought that a boiler replacement is a capital item not a repair. A repair maintains, a capital item extends.

Do you have that advice in writing to protect yourself?

Having that advice in writing would give no proaction whatsoever from having to pay the tax if the advice turned out to be unacceptable from Revenue. It might give you a claim against your accountant, but probably not.
 
Thanks Bronte, can find discussions where people argue both sides online, would be hoping that your thinking is correct. Maybe I should ring revenue and seek clarification from them?

Its called self assessment because you must make the assessment yourself.

While Revenue sometimes do give advice over the phone, and usually worthwhile advice. You cannot rely on that either, its not their responsibility to tell you how to do your tax return.

There is the law, and lots of opinions and you doing a self assessed return.
 
I don't see anything peculiar about Bronte's opinion. The general rule is that if it's merely a replacement, it's an expense, and if it's an improvement, it's capital.

Boilers tend to be rather functional pieces of equipment and unless your new one has major tangible benefits compared to your old one, it's usually far more likely to be a cost item rather than a capital expenditure than enhances the value of the property.

(By the way, I wouldn't be 100% sure that a boiler can qualify for wear & tear capital allowances on furniture and fittings, as I would see it as a fixture rather than as a fitting. - but I think the point is rather moot here.)
 
From the Revenue website leaflet IT 70, there are three pots.

1. Expenditure which can be deducted, 2. Wear and tear and 3. Expenditure which cannot be deducted

From pot 1 Expenditure which can be deducted. "Broadly speaking, deductible expenditure is allowable only to the extent that it:..is not of a capital nature"

It seems to me that a new boiler is a capital item, anything expected to last 10 years is surely capital. So not there then.

Also from pot 1"repairs, (a 'repair' means the restoration of an asset by replacing subsidiary parts of the whole asset). Examples of common repairs which are normally deductible in computing rental income include: mending broken windows, doors, furniture and machines"

Well, mending a machine is not the same as replacing it, now is it, so not there either.

From pot 2 Wear and tear. "Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc)"

For my money this is the one, (its fixtures and fittings, not furniture and fittings). I would think a boiler is either a fixture or a fitting.

From pot 3. Expenditure which cannot be deducted. "Capital expenditure incurred on additions, alterations or improvements to the premises unless allowable under an incentive scheme or incurred on fixtures and fittings"

Maybe here and it is not deductible from income at all, presumably it would be a CGT deduction.

The reality is that you must inform yourself and make your own decision. In reality I would probably deduct it as a repair and if queried say " it's merely a replacement, it's an expense" and brazen it out.
 

The posters on that thread cannot even spell expense :rolleyes:

There was a lot of talk about the UK HMRC and its concept of "replacement" I am not aware of any such concept in Irish Tax, we have deductible expenses, non deductible expenses, and wear and tear, and presumably by implication capital expenditure which does not qualify for a wear and tear allowance.

But I would agree with this.

If you feel that there are good grounds for claiming something as an annual running expence :rolleyes: -rather than capital expenditure, then do so claim.

At the end of the discussion it is what the taxpayer "feels"
 
Having that advice in writing would give no proaction whatsoever from having to pay the tax if the advice turned out to be unacceptable from Revenue. It might give you a claim against your accountant, but probably not.

Agree it would not stop the Revenue insisting on tax being paid, however it would show some level of diligence and care and attention in preparing the return which might help with preventing interest and/or penalties being applied. The Revenue may (may not will) take the view that the taxpayer was reasonably diligent and sought professional advice, etc, in preparation. That's where I am coming from in asking whether there is proof of the advice, what exactly does it say, and how. (Re claim vs acct - most likely no chance there.)

At the end of the discussion it is what the taxpayer "feels"

Most taxpayers would probably feel like paying reduced, better again, no or virtually no tax. But that's why tax law is there, there is literature, guidance notes, precedent, experience, etc. Its not down to how a taxpayer feels. Come on, that's a ridiculous comment/view in all fairness.
 
My view is that you would claim wear and tear allowances on the new boiler over 8 years.

But it's obviously not furniture and it's hardly a fitting that can be easily removed from the premises.

So it wouldn't be eligible for capital allowances?
 
Most taxpayers would probably feel like paying reduced, better again, no or virtually no tax. But that's why tax law is there, there is literature, guidance notes, precedent, experience, etc. Its not down to how a taxpayer feels. Come on, that's a ridiculous comment/view in all fairness.

It's not really ridiculous. The rules are somewhat abstract and can be mutually contradictory. It's usually a matter of judgment as to which rule is most applicable in each situation. So it does come down to what the owner or their advisor feels is the best course of action - not to minimise or evade tax (that would be stupid) but to get it right.
 
But it's obviously not furniture and it's hardly a fitting that can be easily removed from the premises.

So it wouldn't be eligible for capital allowances?

It's neither furniture nor a fitting. In my view, it's plant/machinery. The existence of the various accelerated capital allowances schemes can also be of assistance. They cover items such as energy efficient boilers. If there are accelerated capital allowances available for certain types of boiler, then logically there should be standard capital allowances available for standard boilers.
 
Hi,
We own and rent out a house. We got the gas boiler serviced at the weekend, and the guy doing the service advised that some part is likely to fail soon, and probably wouldn't be worth replacing. (Boiler is about 18 years old) I was wondering if it possible to deduct the cost of a replacement boiler from tax due?
I think it is a bit of a grey area. As it it could be seen as a capital investment, but at the same time I won't be replacing with an improved system, zoned heating etc, I will be just replacing the existing (nearly kaputt) gas boiler with a new working version?
Thanks.

I don't think that a new boiler could be classed as a repair.

Revenue defines a "repair" as "the restoration of an asset by replacing subsidiary parts of the whole asset" - IT 70.

If it is simply a like-for-like replacement, then the cost of the boiler should come under the heading "maintenance", i.e. maintaining the property to the standard it was in when it was first let.

You would, however, have to be in a position to prove that it was a like-for-like replacement.
 
You would, however, have to be in a position to prove that it was a like-for-like replacement.

Say you are replacing a non functioning boiler aged 10 year + with a new energy efficient boiler this would have to be considered like for like as the older boilers are no longer being manufactured. I am assuming that logically they would each have similar outputs.
 
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