Tax treatment of repairs

[Thesearcher]

Hi all,

I’m hoping someone can clarify how Revenue treats emergency remedial roof repairs for a rental property in an apartment complex, specifically in the context of defective building standards (fire safety + water ingress issues).

The management company is organizing major roof repairs at our apartment complex due to defective construction (water leaks, structural issues). This is coming in at a significant cost per apartment. The repairs are urgent the roof failed well before its expected lifespan.

How much of these costs can I write off against rental income as repairs (tax-deductible)?

In my view, all costs are repairs since the roof was defective from the start and never met its intended lifespan. But I’m not sure if Revenue sees it that way. What will Revenue consider "capital investment" (non-deductible) in this scenario?

What documentation do I need from the management company/quantity surveyor to support a tax claim? E.g., a breakdown of costs, engineer reports, or proof of defects?

I want to maximize legitimate tax relief but stay compliant.

Thanks,

 

[KOW]

Receipt for any repairs you pay.
Simply claim as repairs on your tax return end off.

 

[dublin67]

There is a ridiclous amount of tax case law on this type of point and another load of cases on the point on what is capital and what is revenue. I would agree with Kow and claim the expense as a repair as to what it sounds like.

 

[Bronte]

This is 100% repair/replacement and is fully tax deductible. It's not capital expenditure. You just need a receipt. And put in any correspondence to your invoice file so you can refer to it if queried at a later date.

Are you doing your own tax returns?

 

[Thesearcher]

This is 100% repair/replacement and is fully tax deductible. It's not capital expenditure. You just need a receipt. And put in any correspondence to your invoice file so you can refer to it if queried at a later date.

Are you doing your own tax returns?

Thanks, they haven't necessarily classed it as a repair as such and described more as a replacement from water ingress. It also hasn't gone through and we haven't paid for it yet. They're providing a list of costs and we'll ask about a receipt specifically for repairs.

I'm using fast tax but may get a professional for this year as it's 60% of the income so I don't want any comeback from revenue.

 

[Thesearcher]

Thanks @KOW & @dublin67 appreciate the response. It hasn't been specifically classed as a repair which is my concern and more as a replacement from membrane failure and water ingress. Thanks again

 

[Persia]

hasn't been specifically classed as a repair which is my concern and more as a replacement from membrane failure and water ingress

I'd go along with previous advice.

You may be over thinking this.

 

[Thesearcher]

I'd go along with previous advice.

You may be over thinking this.

@Persia just being cautious as revenue can impose fines and interest. Great to get the feedback it's reassuring - thanks

 

[Villaines]

In order for it to be "capital", it has to improve or enhance the building. The work you're talking about does not do that.

Irish Revenue have very little guidance on this stuff as it suits them to leave it as a grey area. HMRC do a better job of removing ambiguity.

I like to look at HMRC's guidance on some of this stuff where there is overlap in the legislation.

There's a nice example here that I haven't had to debate with Revenue yet but it's the idea that "replacing" clapped out items with the latest modern equivalent is still a repair, as it is not an enhacement or improvement by reference to modern standards. I think the same principle should apply when you talk about, say, putting in a new boiler because the old one broke. It's a repair. Same goes for replacing the tiles on a roof, or the membrane on a flat roof.

"At one time, replacing single glazed windows with double glazing was an improvement. Over time, double glazing became the industry norm. This meant that replacing single glazing with double glazing ceased to be an improvement, and capital expenditure, and became allowable expenditure for tax purposes as it was simply replacing like with currently available like."

BIM46925 - Specific deductions: repairs and renewals: what is a repair: changing technology - HMRC internal manual - GOV.UK

www.gov.uk

 

[Thesearcher]

Thanks @Villaines that makes a lot of sense and I agree on "it suits them to leave it as a grey area".

Great examples in the link it puts it in perspective for what it is - a repair.

Thanks all - very helpful!

 

[Millie*]

This meant that replacing single glazing with double glazing ceased to be an improvement, and capital expenditure, and became allowable expenditure for tax purposes as it was simply replacing like with currently available like."

@Villaines - would replacing secondary double glazing with triple glazing be classed as allowable expenditure?

 

[elcato]

FWIW I had this 8 years ago and claimed it as repairs. The receipt I got was the itemised management charge for that year. It was 4k.

 

[Bronte]

Thanks, they haven't necessarily classed it as a repair as such and described more as a replacement from water ingress. It also hasn't gone through and we haven't paid for it yet. They're providing a list of costs and we'll ask about a receipt specifically for repairs.

I'm using fast tax but may get a professional for this year as it's 60% of the income so I don't want any comeback from revenue.

As I stated it’s repair/replacement and you’re overthinking it. It’s not capital. You don’t need an accountant and accountants are not infallible. They even sometimes differ. I’ve a very reliable accountant I hired from AAM.

The reason I asked if you had an accountant is because you were unsure of the tax treatment. As a landlord, with or without an accountant you should aim to understand the tax treatments. Having said that we are all still learning!

 

[Bronte]

Millie if you need new windows then it’s repair/replacement. It’s not like you’re installing windows for the fun of it. Triple makes sense on busy roads for the enjoyment and comfort of tenants.

 

[Villaines]

would replacing secondary double glazing with triple glazing be classed as allowable expenditure?

I think there's a bit more risk with triple glazing, from a rental profit perspective. Also, you have to incur it between lettings or with a tenant in situ, except for the 10k that they allow for pre-letting expenditure. I wouldn't say it's a fixture or fitting, like furniture or a washing machine.

In theory you need to show that something went wrong with what was already there, so you had to repair. If they were to audit it, you need to articulate it in the right way. I mean with single glazed or old double glazed windows, you could arguably say the glass was causing excessive condensation, leading to mould, and the tenants were complaining because it's sub-standard living conditions. You could suggest that the seals were gone on the frames and wind was blowing in, so you couldn't just change the glass, the frames had to come out as well. So you swapped them out for modern equivalent quality windows that results in no condensation and mould, as should be expected of rental accomodation in this day and age.

The fallback is that it's added to your cost for CGT purposes (albeit which you may never need to use). The same goes for a bathroom refurb.

 

[Millie*]

@ Villaines. Thank you for all the detailed advice and very much appreciated.