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Tax Tips Q&A is back for its second month. This month’s tips are all about property repairs.
These handy property questions and answers have been shared with us from Arthur Weller’s ‘247 Property Tax Questions Answered’. In this guide he answers tax questions on Capital Gains Tax, Buy-to-let Tax, Inheritance Tax, Gifting Tax and so much more.
Do Repairs to Commercial Property Count as an Allowable Expense?
Question:
If a business rents a commercial property and has to replace part of the concrete floor in the warehouse to enable continued operations. Would this be an allowable expense?
Answer:
If I understand you correctly, you are a tenant who runs a business from premises that you rent from a landlord, and you have to pay for the repair of the concrete floor. Your question is: is this payment an allowable business, revenue, expense that you can offset in full in the current year against your business profits? If you look on the HMRC Property Income Manual you can see that a repair of a part of the structure of a property, when the replacement can be classified as ‘like for like’, i.e. without a significant upgrade or improvement to what was there originally, can be treated as a revenue, allowable business expense. This can be true even if the repairs are substantial
What Constitutes Repairs to the Property or an Improvement?
Question:
I have a receipt from a tradesman who did some work for me in my rented out property. The receipt says ‘remove and dispose of existing bathroom. Replace bathroom with shower and small bathroom fittings.’ There was a bath originally and the room itself a bit dated. The bath has been replaced with a shower and made more presentable to help with re-letting the property.
Answer:
If you look at HMRC’s Property Income manual, you can see how HMRC distinguishes between an improvement and a replacement of ‘like for like’. From what you have described it would seem that your case is a revenue expense, allowable against rental income.
Can I Claim the Repairs on my Tax Return?
Question:
I have a rental property and had a major flood in it last year, resulting in the cancellation of lots of bookings. I paid out about £20,000 for repairs to the property. However, I did not claim on my insurance. I am trying to claim for all the repairs on my tax return by stating that it was simply replacing what was originally there. Is this the correct procedure?
Answer:
It is the correct procedure. As long as you are only restoring the property to its original position, and not making improvements, this is an allowable expense. See the Property Income Manual.
We hope these questions have helped you understand the tax implications of repairs to your properties. Check back next month for more questions and answers from Arthur Weller. If you can’t wait to read more from ‘247 Property Tax Questions Answered’ the full book is available in the Landlords’ Tax Pack.
