Tax: Property Income Manual

If anyone is looking for guidance on specific tax questions, this is a good place to look…

It is the HMRC internal guidance for their staff that tells them how to treat things, so if you follow it, you can’t go far wrong.

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Does anyone know if costs of temporarily rehousing a tenant for essential repair work is an allowable expense. I cannot find anything online on this subject or in PIM

Is this something your insurance will cover?

Ask the question: Is is wholly, exclusively and necessarily for the purposes of your letting business? If the answer is yes (which I would say it is) then, yes.

You could not claim a tax deduction if it was reimbursed by your insurer though.

…Or if it was covered by your insurer but you chose not to claim.

Thanks Cath2, and yes, wholly and completely for the letting business. We decanted him and possessions, paid for his accommodation and brought him back.

We didn’t contact insurer about this.

totally tax deductable

I don’t see why you couldn’t claim if it was covered by your insurer but you didn’t claim - that must happen a lot.

Say you have a leak that would be covered by your insurance. Damage is, say, £300. Excess is £250. Who would claim and risk their insurance cost rocketing next year? Just because you could have claimed but didn’t would not make the £300 repair bill disallowable for tax.

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thanks. The rehousing was necessary for rewiring as old wiring was faulty. I’m hoping that rewiring is also revenue, as it doesn’t add anything, just uses modern materials etc

Sounds like it to me :slight_smile:

I think that HMRC may baulk at the landlord claiming tax relief for an insurance policy that included an alternative accommodation allowance and then claiming the accommodation cost as well because they didn’t want their premium to increase. Not saying that applies here.

The insurance issue was raised by another member. It’s not in the frame of my question. All I was and am asking is whether rehousing costs borne by a landlord to enable works to be carried out are allowable as a property expense, ie, as revenue expense. I think at least one responder said they thought that yes it could. I am planning to write an explanatory note to the Revenue, to explain that X portion of the expense total is due to temporary rehousing costs, then it’s just up to them to decide if that’s allowable.

I take it you do not have an accountant ?

@user117 You would not have incurred the costs had it not been for your letting business, therefore it is allowable.

It is self assessment so it is up to you to decide if it is allowable - they will just accept it unless they choose your return for enquiry. No harm in putting the note though, I guess, because they then can’t reopen the return after the normal enquiry window to enquire into it (they can under discovery rules if they find something you have been doing wrong in an enquiry into a later return and they think you have done the same in earlier ones - but if you have told them, they can’t ‘discover’ it).

(I am an accoutant, by the way, as well as a landlord, so I do know what I am talking about. Only 28 returns left to do before next Monday :roll_eyes:)

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I don’t agree - it is commercial decision. Spend an extra £100 now to save several £100 in the long run, so why would HMRC argue with that - less costs for you to deduct in the long run.

As long as the costs are genuinely incurred and not reimbursed by insurance it is not relevant whether they would have been covered by insurance. You aren’t likely to not claim if the claim would be significant enough for HMRC to worry about.

If the sums spent and saved are similar that may be true, but if the amount spent on the accommodation significantly exceeds the likely increase in the insurance premium then I dont think it would wash.

Exactly - commercial decision - you woudn’t not claim if the claim would be more than the likely increase in premiums.

Except that what can initially appear to be a few days in a hotel can turn into weeks due to builder delays, so costs can run away. I’ve been in a similar position over paying for damage caused by a flood, where refurb costs greatly exceeded the estimates, although I have to say I did put the full cost of the repair on my tax return and would usually suggest its worth a try.

Thanks very much for that Cath, it coincides with my instincts to ‘show your reasoning’ and good to hear you’re an accountant. Appreciate you taking the time