Repairs or improvements
Is your commute to work a game of 'dodge the pothole'? Whether the road is public or private property, repairs will be always be necessary, and sometimes nothing less than a complete new surface will fix the problem.
The decision to patch or resurface your own roadways has a significant effect on tax bills, as the cost of repairs will qualify for a tax deduction. But where the work amounts to an improvement or a complete renewal of the asset, that cost cannot be deducted immediately. Capital expenditure on improvements or renewals is denied a tax deduction until the property is sold.
Capital allowances can be claimed for the capital expenditure incurred on plant, machinery or certain fixtures to buildings, but not for the cost of laying roads or for the structure of buildings. There are special rules for buildings used for research and development projects.
The taxman frequently challenges the cost of repairs shown in accounts, particularly where the sum expended in one year is large. However, HMRC has recently released new guidance on repairs and improvements, which confirms that the resurfacing of a road can be a repair that qualifies for a tax deduction.
There are still many grey areas which can be argued to be one side of the capital/repairs line or the other. Discuss your property expenditure plans with us, and we can help you decide if the cost will be tax deductible.