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New wear and tear rules are a big relief for landlords
29 July 2015
Accountants, landlord bodies and tax experts criticised Chancellor George Osborne for allowing HM Revenue & Customs (HMRC) to withdraw a concession for landlords to claim the costs of replacing free-standing white goods and other furnishings in letting property.
As a result of lobbying, Osborne has revamped the rules from April 2017 and supercharged them for all landlords.
By scrapping the 10% wear and tear allowance for furnished properties and extending the new wear and tear relief to all property let as a home, Osborne has made claiming tax relief fairer for all buy to let landlords.
Claims for holiday lets and homes rented out by companies remain the same as they can claim the cost of replacing appliances and furniture under capital allowance rules.
According to a discussion document published online by the Treasury, the relief covers ‘replacing furniture, furnishings, appliances and kitchenware provided for a tenant’, including:
• Furniture or furnishings, including big ticket items like beds or sofas
• Televisions and electrical appliances
• Fridges, freezers, washing machines and driers
• Carpets, rugs and wooden floor-covering
• Curtains and linen
• Crockery or cutlery
“We believe that limiting the scope of the allowance to items that are provided for the tenant’s use in the dwelling house that is being let removes any opportunity to claim the cost of larger items used for the purpose of the property rental business, for example, cars,” says the consultation document.
Replacing fixtures are not included under the new relief because replacing them is tax-treated as a repair.
These fixtures include:
• Baths, showers and sinks
• Fitted kitchen units and integrated appliances
“Landlords will no longer need to be concerned with whether the item being replaced is a fixture and therefore a repair to the property or not. In either case, the cost can be deducted from their rental income to arrive at the profits of their property rental business,” says the document.
Read the consultation document