Revenue querying Capital Allowances

Hey all.

I'm one of many of the reluctant landlords out there. Left my negative equity home in 2011 to rent it and make a small loss each year. I've also been completing my own Form 12 returns each year.

I submitted my 2013 return last week and have now been contacted by Revenue seeking a breakdown of the Wear and Tear figures I've been using and looking for receipts etc. I'm in the position that I had furnished the house while living there and do not have receipts. I had done extensive reading before completing my first Form 12 and the majority seemed to say that you could use pre-letting expenses (furniture and fittings), once they were fairly and reasonably costed at their current value, not their purchase price (which may have been a few years previously). So that's what I did. I valued all contents at €13,000, spread over 8 years (12.5%) per annum, 2011 - 2018. Does this sound high? It's only a 2 bedroom house, although there are 3 bathrooms. An example and a big ticket item, for example would be mirrored sliderobes in master bedroom, which I valued at €1750, even though I paid well over €2000 a few years previously. Should I have gone lower? I've read various opinions on this so I'm not expecting an answer as such. I don't know what I'm expecting really, just some sort of 'there, there, it'll be okay' I guess Yes, I'm panicking a bit...

Anyway, the lady who contacted me seems to have taken issue with this and is adamant that I cannot put a value on pre-letting expenses. Although she said she needs to 'look into it more'. I don't think she's particularly au fait with what to do with me, being honest. I'm now bricking it that I'm going to be faced with a huge bill, which I frankly cannot pay. I'm in the process of sending her in a list of contents, with their values attached and attaching a cover letter. I've explained in this letter that the values I've attached were fair and reasonable and based on their value at time of rental, not what I actually paid for them. As this is what I did.

Oh and to top it all off, I bought an item in the current year (2013), I know the exact date and where I bought it, but can't find the b#@@#y receipt. Of course, in my stupidity, I've claimed for it anyway. And now I need to furnish receipts. What to do???

So, do I play it cool for now or plead my case from the offset in this covering letter? Or is there any point at all? Am I just screw-balled? Anyone ever been in this position? If I'm met with a huge bill, how the hell do they expect me to pay it? I'm heading back to education in 2 weeks.

And finally, anyone want to buy a house? Thanks for reading. Any and all advice is welcome.

The phrase "pre-letting expenses" has a very precise meaning in relation to tax of rental income. It does not refer to the cost of items of furniture ect. supplied with the property.

"pre-letting expenses" are not tax deductible, but that is ok because your mirrored wardrobes are not "pre-letting expenses"

You are entitled to capital allowances on the value of the contents at 12.5% over the 8 years as you have described.

If you put the 12.5% down as an expense that is wrong, you should have put it down as a capital allowance. This should result in you paying less rather than more tax.

As to the issue of not having receipts, well you should have them but I would not make an issue of this unless Revenue does.

What you do now. I suggest that you file an amended Form 12 with the amount claimed as a capital allowance and not a "pre-letting expense"

Thanks for your reply. Sorry, I probably shouldn't have used the phrase 'pre-letting expenses', I have always entered these figures as Capital Allowances. It's a relief to hear that furniture and fittings in the house, prior to rental, can be used as such. Although the lady in Revenue doesn't seem to think so...

Anyway, since posting this, I called her again for further clarification. She has passed my file on to someone else who is more 'up to date' with what is and is not allowable, although she still thinks it is unlikely that furniture already in the house would be acceptable. I hope she's wrong!

It has always been my understanding that the furniture in the house when you rent it out is allowable as a capital allowance. I let out my old apartment, which is also a 2 bed, and my capital allowances are about 9K in total. I keep a spreadsheet in which I record each item, its cost, and the year in which it was bought. For items that were in the apartment already before I let it out (eg sofas, kitchen table etc), I estimated their value. For many of these I still had the original receipts, so I based my estimate like this - eg if the item was 2 years old when I let out the apartment, then I estimated its value as being 75% of the original value (ie 2X 12.5% depreciation per year). i keep receipts for everything, even things like new batteries for the smoke alarms!

There's a detailed response here from Mandelbrot.

The title of your post is too vague. Please it in line with the Posting Guidelines.

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Brendan
Administrator

Thanks for the reply, delgirl. Unfortunately, I did not foresee having to rent this property, therefore did not keep receipts. Of course, since commencement of renting it out, I've kept everything. Except the receipt I lost that is! Anyway, still waiting for a call back from Revenue, so fingers crossed all will be fine...

Title edited, Brendan. I trust it is now within Posting Guidelines.