Tax relief on essential work

S

Sharkee

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Thanks in advance for any help.

I recently bought a house with a buy to let mortgage. It was a receiver sale and the last people living there were renters (the owners never actually lived there it was always rented out) The house was idle for 6 months then before I got the keys. My questions are around tax ultimately.

The house needed a fair bit of work (I knew this before buying) but I now have it pretty much ready to let.

The biggest job/ cost was plumbing because the boiler was broken and radiators were old and damaged so the lot was replaced. Other things broken were the alarm, the gas hob and there was no washing machine. I also got the windows serviced to make them as efficient as possible.

All of which needed to be done and fixed before you could let it out.

Because the house was rented before I bought it, it needed to be painted etc too.

My question is can I claim tax relief on all of this right away or over the 8 years. I think I can but the rules seem very very complicated.
 
Sharkee said:
My question is can I claim tax relief on all of this right away or over the 8 years. I think I can but the rules seem very very complicated.
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Pre-letting expenses are not allowable, apart from auctioneer’s letting fees, advertising fees and legal expenses incurred on first lettings.

Expenditure incurred between lettings is allowable but only if the same landlord owned the property before and after the void period.
 
Thanks for responding sophrosyne.

Has this always been the case or did they just change it this year?

The reality is the house couldn't have been let without this essential work especially on the heating side of things and the washing machine.

I signed contracts for the house last year in November and was advised then that I could write off these things?

It's all very confusing but needless to say this would be very disappointing
 
Sharkee said:
Has this always been the case or did they just change it this year?
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No, this has always been the case.

You might be able to argue that some of the expenditure was of a capital nature, i.e., enhancements or upgrades rather than repairs or replacements.

If that were to be accepted, that expenditure would be allowable against CGT on a sale of the property concerned.
 
Is there guide as to what are Capital Expenditure items and examples of what can and can't be used for tax write off purposes

Building a fence to block off a road, can that be offset against rental income

Insulting the house, does all of that qualify

Etc.
 
I have read it, I knew the insulation came under the new home improvement scheme but wasn't sure you could set the total cost against rent

If I put in new windows because I don't like the old ones or for better insulation, is that a capital expense that is allowable to be used against rental income? I'm just not sure what is and isn't allowable, hoping someone here can tell me rather than paying for an accountant
 
You are entitled to offset revenue expenses against rental income and capital expenses against CGT on a sale of the property.

To put it simply, a revenue expense is the cost necessary to maintain a property in the condition it was in when it was first let.

Anything that goes beyond that is a capital expense.

In other words, you can offset repairs and replacements against rental income but not additions or upgrades.
 
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Sophrosyne said:
In other words, you can offset repairs and replacements against rental income but not additions or upgrades.
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Wouldn't be the sensible thing to do to allow all expenditure on a rented house to be offset against rental income. Owning a rental property with a mortgage creates a lot of cash flow problems for eg paying tax on the reduction of the principle if you are lucky enough to be able to do this plus all the other indirect taxes some of which are not deductible.
After all Revenue will get you when you are selling the house with CGT. While CGT maybe lower than income tax revenue will gain from VAT and tax on the labour and goods etc.
It would be a cost neutral incentive while improving the property for the tenants. You could put in a provision that the property had to remain as a rental property for a least 3 years or whatever otherwise a claw back.
It is quite difficult to upgrade a rented property given all the obstacles that are placed on the owner by difficult bank lending criteria and the current tax regime that is in place.
 
Hi Sharkee,

you may be able to avail of the [broken link removed], but I can't remember whether you need the builder to get clearance before carrying out the work.
 
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