Hi
I will be doing my self assessment soon and am wondering whether certain expenses are running costs or capital expenses. Any help would be appreciated.
I bought another property last year and needed an EICR to be done. The electricians said I needed a modern consumer unit with an RCD and they also installed a ring main to the kitchen which as far as I am aware wasn’t there before. Is it fair to say that anything that is picked up on an EICR is a running cost and wouldn’t be seen as capital expenses by HMRC?
I also undertook my own fire risk assessment like you do and bought a fire extinguisher and fire blanket for the kitchen. Would this be seen as a running cost for the same reason as the electrical work?
Thanks
Steve
I believe that everything you mention is revenue expenditure unless it was part of a large scale refurb of the property.
The answer is, it depends!
I would claim the EICR and be consumer unit as income tax deductible (revenue) rather than capital gains tax deductible (capital). But, if HMRC did an inspection, they could argue that it is capital, if you bought the property at a lower price because it needed work done, and it was not in a condition in which you could have legally let it. It’s a bit of a grey area.
On the ring main, if it was just updating to modern requirements, I would claim it as revenue. But, if it was because I was upgrading/extending the kitchen, it would probably be capital.
I’d probably also claim the fire equipment, but, if it wasn’t a replacement for what was already there, technically, it should be capital (which would probably actually mean that you’d never get a deduction for it because you can only claim a capital deduction if the item is still there when you sell).
HMRC have a toolkit (aimed at tax professionals, but fairly readable) here… Capital versus revenue expenditure toolkit - GOV.UK
Thanks Folks. I think I might claim both as revenue.
Steve
Hi Steve,
HMRC offer various free webinars specifically for Landlords, as well as their own manual.
You can sign up with them and receive email alerts when they hold specific ones.
Rgds, Sue
It’s an allowable expense, both the report and remedial work.
https://community.hmrc.gov.uk/forums/customerforums/ifp/8f171155-6aca-e911-b3b9-00155d9c6b78
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Thanks John. That’s fairly clear now.
Steve
Thanks Sue. I’ve registered for the webinar in August. I am getting better each tax year but there is probably lots to learn still.
Steve
Actually, @John_G 's link is a slightly (and from a tax point of view, potentially fundamentally) different scenario - the property had been owned and let before the EICR rules came in, so there is no argument against the costs being revenue.
The OP has just bought this property and needs an EICR before he is able to let it, so it is not cut and dried - technically if it was not in a lettable condition when it was bought (which if it needed work for the EICR, it wasn’t) HMRC could argue is capital not revenue. So the link is not relevant to this situation.
Thanks Cath2
I am fairly sure the property was rented before we bought it so a good argument for it being revenue.
Steve
I think it gets easier once you’ve master HMRC’s “jargon” on their SA100 Returns [the Notes help you understand what they mean - and they have, over the years, made it a bit more user friendly(:)].
Good point, completely missed that part from the original post 