Depreciation on Fixtures & Fittings

B

Buckshee

Registered User
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Quick question please and apologies in advance if the answer should be obvious but here goes anyway.

The depreciation allowance on fixtures and fittings for a buy to let property is 12.5% per year for 8 years. Does this mean 12.5% of the total outlay per year over eight years ( i.e. the same amount each year ) or does it operate on a reducing year by year amount ?????

EG if the total cost of F&F is €10,000.00 then year one is obviously €1250.00 but is year two and each subsequent year the exact same amount or is it €8750.00 x 12.5 = €1093.75 and siminarly reducing as the years progress ????

Any advice appreciated
 
More of a tax question but here ya go

Capital allowances not depreciation allowance is based on the cost at 12.5% straight line so the amount will be fixed each year in your example €1,250
 
Thanks Bazermc, much appreciated

I was going to post my question in the Tax thread but it clearly says in the heading that property related tax questions should be posted in the Property Investment section so here I am
 
One final point to note - the burden of wear and tear of the assets must remain with the landlord in order for capital allowances to be available that must be clearly stated in the lease agreement
 
purplealien said:
Do you need receipts for all the furniture you purchase or do they take your word for it?
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Yes you need receipts and must retain them for 6 years following the end of the tax year in which the asset was purchaed - Revenue can and might audit the return - and you will need to support your claim for capital allowances
 
I will be putting all the furniture from my own house into my investment property. This furniture is 3 years old. It is good furniture eg. the sleigh bed cost me 3,500 euros, dining room table and chairs 2,500 euro etc. I don't have any receipts for any of these, does this mean to say that i cant claim for these?
 
Just make an inventory of the fixtures and fittings and guesstimate their values as at the date of the first letting. It is not necessary to have original invoices - your best estimnate will do.

It would be important to keep safe a copy of the inventory for future reference if needed.

Once the amounts claimed are reasonable, and once nobody is trying to pull a fast one, I don't think the Revenue are going to be unduly concerned about the exact valuations used, particularly if the taxpayer has kept a comprehensive inventory of the contents of the house, and all other aspects of their tax affairs are fully in order.

I would be concerned at the value of the furniture you are going to put into the rental property - be aware that most tenants will not look after your property as you would and you could find that your expensive items will be in tatters after a mere year of occupancy by careless tenants.

 
I would be concerned at the value of the furniture you are going to put into the rental property
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Im doing a total revamp to our own house which will include getting all new furniture so it makes sense for us to buy a new place to house our old furniture . Seriously though, if there is damage to the furniture shouldnt the tenant be liable for some damage costs? Id hate to see the furniture not being respected because it did cost alot of money.
 
purplealien said:

Seriously though, if there is damage to the furniture shouldnt the tenant be liable for some damage costs? .
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Yes you could make the tenant liable for damage though the lease agreement but that means you can not claim capital allowances then on that furniture
 
What if i get my solicitor to wite up a lease agreement to say that the tenants are liable for any damages. This would mean that the tenants would respect all furnishings in the house and if something does get damaged, i will know that it was accidental and i will pay for it myself, therefore i will still be able to claim capital allowances
 

What do you imagine the capital allowances are for? Glad to see that landlords haven't changed their ways from when I was a tenant 15 years ago.
 
bazermc said:
Yes you could make the tenant liable for damage though the lease agreement but that means you can not claim capital allowances then on that furniture
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I would disagree strongly with this interpretation. The capital allowances regime is designed to cater for normal wear & tear, not for specific damage caused by accidents or inappropriate use. Capital allowances are only available over a period of 8 years and it is obvious that most categories of furniture and contents in rented properties will depreciate over that span of time, even where accidental damage is avoided.

Where a tenant pays for damage, the landlord will be unable to use the repair/replacement cost as a deduction from profit. However I can't see how this would affect their ability to claim capital allowances, except perhaps where the lease is worded so strictly to force tenants to meet the cost of damage AND normal wear & tear.

I doubt if this happens often in practice. I honestly can't see how too many landlords would get away with forcing tenants to replace curtains that have yellowed over eight years, or tv's or videos that have become technologically obsolete over a similar period. Especially now when tenants can use the PRTB to settle disputes with landlords.
 
 
As Ubiquitous pointed out, the allowance is for normal wear and tear and does not take damage caused by tenants into account. Most basic leases already state that the tenant is obliged to treat furnishings and fittings with care.

What I meant by concern at the value of the furniture was that I made this mistake with my first letting quite a few years ago. We left very expensive furnishings in the property and when the tenants left, using their deposit as the last month's rent, we were left with a house full of broken, worthless furniture.

Needless to say, they left no forwarding address and we were unable to claim any compensation for the loss.
 
ubiquitous said:
I would disagree strongly with this interpretation.
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My interpretation of the section that deals with allowances to lessors is strict. Given that the letting of the fixtures and fittings is a seperate letting to the actual premises, the following section deals with a letting of machinery or plant (fixtures furniture etc would qualify as same), I quote;

"298 Allowances to lessors
ITA67 s241(5), s252 and s281; CTA76 s21(1) and Sch1 par6 and par16; FA80 s17(3)
(1) Where machinery or plant is let on such terms that the burden of the wear and tear of the machinery or plant falls directly on the lessor, the lessor shall be entitled, on making a claim to the inspector within 24 months after the end of the chargeable period, to -
(a) an initial allowance under section 283, and
(b) a wear and tear allowance under section 284,
in relation to the machinery or plant, equal to the amount which might have been allowed if during the period of the letting the machinery or plant were in use for the purposes of a trade carried on by the lessor."


Is you still do not believe me take a read of revenue tax briefing 42 page 28 & 29, this clearly outlines revenue position

[broken link removed]
 
bazermc,

I don't believe that this is at all relevant. In most residential property letting situations, the burden of normal wear and tear clearly remains with the landlord even where the tenant is accountable for damage arising from accidental breakage or inappropriate use - see my example re yellowing curtains or obsolete TV/video above.
 
Agree with ubiquitous above. Having rented many apartments and houses over the past number of years, it is a standard part of the lease that the tenant is not liable for normal wear and tear but is responsible for any damage outside of this caused to the property
 
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