Alarm - cost and tax treatment

N

Nick1911

Registered User
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Hi

I had an alarm installed on a rental property last year. How do I treat this from a tax perspective? Can I write the total cost off as an expense under the "Other" category on ROS and can I include the cost as a capital expenditure and write if off over 8 years as a Capital Allowance.

Thanks in advance.

Nicholas
 
I believe this cannot be wrote off against rental profits. Instead, it'll be added to the cost of the house and will result in a reduction in CGT tax when you come to sell the house.
 
In slightly different circumstances the Revenue have indicated that alarm is plant. As plant it is allowable for capital allowances over 8 years (12.5% sl). Here is the link:

[broken link removed]

The difference between plant and buildings is that plant can be removed without damaging it. Plant qualifies for capital allowances and building don't (unless industrial building which are very different).
 
Thanks, so it cannot be included as a capital expenditure, can this also be included as an expense?
 
For commercial, I agree that they can be written off against profits. However, for residential property, I believe it's considered an improvement to the property and, therefore, only allowable against CGT when you come to sell.

If you had to repair the alarm, it'd be a different story. Likewise if the alarm had to undergo an annual service - those expenses could be claimed in full for the year in which they were incurred.
 
According to the Irish Taxation Institute book on capital allowances "A fixture is defined as: "an object firmly fixed in place." In determining whether an item is a fixture, one test is to assess the extent of damage which could be caused in removing the fixture from the structure to which it is attached. A television aerial was held to be a fixture in Maye v Revenue Commissioner 3 ITR 332 due to its firmness to its attachment to a building."
The Revenue leaflet on rental income (IT 70) states "Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc) provided by a lessor for the purposes of furnishing rented residential accommodation. The allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms on the open market. The rate of wear and tear depends on when the capital expenditure was incurred. For expenditure incurred on or after 4 December 2002 the allowance is 12.5% of the expenditure per annum for eight years."

So the issue is whether the alarm can be removed without causing damage to it. If it can be removed without damage then it is a fixture and capital allowances can be claimed according to the Revenue's own material. It is entirely irrelevant whether it is a commercial or residential letting.
 
Expense Also?

Thanks, so assuming the alarm can be classified as a fixture and can be written off over 8 years. Can you also write the full amount against rental income on the year the expense was incurred or is that trying to have it both ways with jam on it?
 
An expense is either capital or revenue but not both. Only certain revenue items can be written off in a rental income computation. This would be capital and therefore not capable of being claimed as a revenue expense.
 
What happens when you replace a very basic but BROKEN 20 year old alarm with a new all singing all dancing model that costs 10 times as much as what it is replacing? It is a repair, but at the same time an improvement (of a capital nature). I'm just using the alarm as an example but how should such things be handled (applies especially for boilers I would have thought)
 
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