I recently started renting out a flat that I had been living in for the previous 8 years. When I moved out, I took my furniture with me and bought furniture for my tenant to use.
I just asked an accountant to submit my tax return and he says that the furniture purchase is an allowable expense, but I thought initial furniture purchase doesn’t count. Does it technically count as replacing if the previous furniture was for my use? The accountant isn’t super communicative, so I just want to check. Does anyone have experience with this?
Furniture is allowable
In the old days there was a 10% allowance for furniture etc then Osborne changed it so we lost the 10% allowance and can claim for furniture carpets etc
I believe you are right, that initial furniture for a new rental business put in before the first tenant moves in, is not deductible from revenue costs. I believe it should be claimed as capital cost upon sale.
I may be wrong as have no personal experience of this, snd hopefully someone else clarifies for you 100%
I dont think that furniture is claimable as capital either. My understanding is that initial furniture is not claimable at all, whether purchased or donated. Replacements of that furniture with furniture of the same standard are a revenue expense and can be claimed on your annual tax return.
Yes to be honest HMRC is pretty clear Work out your rental income when you let property - GOV.UK
I’m just wondering if there is some nuance whereby I technically did replace the furniture that was there for “the exclusive use of the lessee in that dwelling-house”
I’ll write to the account to absolutely clarify that, but it’s likely I’ll end up paying more tax Too honest for my own good…
“You cannot claim the costs for replacing furnishings or equipment in a property. These are not allowable as costs of maintenance and repairs, but from 6 April 2016 they may qualify for replacement of domestic items relief.”
Replacement of domestic items
If you let out residential property (a dwelling house) you may be able to claim a deduction for the cost of replacing domestic items such as:
movable furniture for example beds, free-standing wardrobes
furnishings for example curtains, linens, carpets, floor coverings
household appliances for example televisions, fridges, freezers
kitchenware for example crockery, cutlery
Replacement of domestic items relief is only available for expenses incurred from 6 April 2016 for Income Tax purposes.
You can claim this relief when:
you carry on a property business that includes the letting of a dwelling-houses
an old domestic item provided for use in the dwelling-house is replaced with the purchase of a new domestic item and:
it’s provided for the exclusive use of the lessee in that dwelling-house
the old item must no longer be available for use by the lessee
If the furniture was there when you bought the property, then you paid for it and therefore you can claim replacement of domestic items when you replace it.
Too honest for my own good…