Cost of contents in let property
Many landlords are not aware that the rules for deducting the cost of furnishings and goods used in residential let properties changed in April 2013.
For periods before 6 April 2013 (1 April for companies), HMRC allowed a deduction for the cost of renewing carpets, curtains, furniture and free-standing “white goods” in all let residential properties on a concessionary basis. Alternatively landlords could claim a wear and tear allowance equal to 10% of the rent (net of some expenses) where the property was fully furnished.
This “renewals” concession was withdrawn with effect from 6 April 2013, but the wear and tear allowance remains for fully furnished let properties.
HMRC say that property is “fully” furnished when it contains sufficient furniture, furnishings and equipment for normal residential use. This is a bit vague, but a property that contains the big stuff such as beds, sofas, table, chairs, cooker and fridge should count as fully furnished. The 10% allowance is designed to cover the cost of replacing all those items, but not the initial cost of fitting out the property when it is first let.
Wear and tear can’t be claimed where the property is unfurnished or partly furnished. So there is no deduction for the cost of replacing items such as carpets, curtains and white goods which are not built-in.
The cost of repairing or replacing any items fixed to a let property such as bathroom fittings, or a built-in hob and oven in a kitchen, are deductible for furnished or unfurnished properties. However, any replacements must be on a like-for-like basis. Where fixtures are replaced with higher quality items, the whole cost must be treated as an improvement to the property, and added to the capital cost of the building.
Talk to us about your plans to refit or refurbish your let properties so we can sort out what’s tax deductible in advance.
