New Windows. Repair or Capital Expenses?

[gearoidc]

I stumbled on these today. It contradicts a lot of what I've read on here about the subject.

This is from the UK Govt Revenue site-




"Problems can arise with old assets over where is the dividing line between a repair and an improvement.

A repair or replacement of a part of the asset using modern materials may look like an improvement because of the greater durability, superior qualities, etc of the new material. If the new materials are broadly equivalent to the old materials then the cost is normally an allowable expense.

EXAMPLE:
Kate has the windows of her offices replaced. The old windows were singled glazed. She just wants to replace the old units. Building standards have improved and the types of replacement windows available from retailers have changed. The replacement windows are double-glazed. This shows the effect of changes in technology. At one time replacing single-glazed windows with double-glazed windows was regarded as an improvement and therefore capital expenditure. But times have changed. Double-glazing is now standard and is the modern equivalent. Replacing single-glazed windows by double-glazed equivalents counts as allowable expenditure on repairs."


........And the following is from a UK legal/tax advisory website.

[broken link removed]


" Look to claim costs as 'revenue' costs

If you can claim large costs as 'revenue' costs rather than 'capital' costs, then you can reduce your annual property income tax bill in a big way.
Sometimes it's easy to determine whether a cost is of a capital nature or not. For example, if you have had a new conservatory built, or even a new bedroom added, then this is clearly a capital expense. This is because it has increased the value of the property.
But sometimes distinguishing between the two costs isn't so clear.
Consider the replacement of windows. If you currently have rotten single glazed windows, then you will be able to replace them with UPVC double glazed windows and offset the entire cost against the rental income. There will be no need to class this as a 'capital cost'.
This is because it's generally accepted that standard windows used in modern properties are UPVC and not wooden single glazed windows, so you're replacing the current standard window fitting with a like-for-like window.
Remember that if you can class a cost as a 'revenue' cost, it will improve your cash flow as you will pay less property income tax."

Any opinions on this particular viewpoint?

 

[oldnick]

Irish Revenue allows "repairs" and defines a repair as" restoration of an asset by replacing subsiduary parts of the whole asset" (my bold type).
(And I dont think they mean that the window frames are a subsiduary part of the property !)

So, certainly a broken window or replacing some of a rotten frame are repairs.
But whether Irish Revenue would go along with UK Revenue regarding replacing the lot and claiming as a running expence...doubtful.

But - and this is wrong advice which other posters will reprimand me for......

If you feel that there are good grounds for claiming something as an annual running expence -rather than capital expenditure, then do so claim.
After all, the UK Revenue has a detailed guide on claiming new windows as a running expence so it would seem reasonable if one believed the same would apply here.

Look- it can be more advantageous to put something down as a capital expence.It depends on many factors, mainly your tax bracket.

 

[mandelbrot]

Any opinions on this particular viewpoint?

Have you asked the tax office? And not just the poor pleb who answers the switch - tell them that you need confirmation in writing so an Inspector will have to deal with it, and then see what they say, that way you'll be beyond reproach...

 

[gearoidc]

If you feel that there are good grounds for claiming something as an annual running expence -rather than capital expenditure, then do so claim.
After all, the UK Revenue has a detailed guide on claiming new windows as a running expence so it would seem reasonable if one believed the same would apply here.

Look- it can be more advantageous to put something down as a capital expence.It depends on many factors, mainly your tax bracket.

I'm not sure what you mean by a "capital expense". Do you mean the annual 12.5% wear-and-tear?

Have you asked the tax office? And not just the poor pleb who answers the switch - tell them that you need confirmation in writing so an Inspector will have to deal with it, and then see what they say, that way you'll be beyond reproach...

A bank official pal told me stories of colleagues who would refuse mortgage applications (remember them?) sent in for final approval, simply because they were too hungover to bother reading them.
I have this (maybe unfair) suspicion that an inspector in Revenue might act in a similar fashion.

 

[mandelbrot]

I'm not sure what you mean by a "capital expense". Do you mean the annual 12.5% wear-and-tear?

Yes that's what he means, but in the case of windows I don't think they can ever be that. They'll either be repairs (on the basis outlined in the HMRC documents quoted), or they'll be enhancement (relevant to CGT).

To qualify for capital allowances, they would have to be fixtures & fittings, but I've never heard of anyone moving house and bringing the windows with them!

A bank official pal told me stories of colleagues who would refuse mortgage applications (remember them?) sent in for final approval, simply because they were too hungover to bother reading them.
I have this (maybe unfair) suspicion that an inspector in Revenue might act in a similar fashion.

I think you can safely put that suspicion aside! In my experience Revenue is the most efficient Govt Department.

 

[oldnick]

Actually I did mean a capital cost as in improving a property which is liable to CGT. I wrote it badly - sorry.
I meant that depending on one's income -and especially if CGT increases as many think it will - then it may be worth putting something down as an capital improvement rather than an expence.

 

[mandelbrot]

Actually I did mean a capital cost as in improving a property which is liable to CGT. I wrote it badly - sorry.
I meant that depending on one's income -and especially if CGT increases as many think it will - then it may be worth putting something down as an capital improvement rather than an expence.

Ahh fair enough, sorry for putting words in your mouth there so!

 

[oldnick]

No, no it was my fault for lack of clarity.

I find this thread of some interest because despite my usual pompous spouting of opinions I confess ignorance and confusion as to what expence is actually a running expence, a wear-and-tear exepnces like furntiure,carpets and various fittings -or capital improvements to set against CGT.

Most are obvious but ,like the new windows above which i would have put down against CGT there are some that i wonder about -a new fitted kitchen ? Replacing a broken-down conservatory ? A garden shed?

I'm inclined to put these down as wear-and-tear. Obviously a bricks-and-mortsr extension can be set against CGT -but a small glass conservatory?

Is there is written defintive guide on this -as the UK manual seems to be?