When your property is fully furnished you can claim a wear and tear allowance (10% of the net rents), each year to cover the cost of replacing furniture and furnishings such as carpets and curtains. You can only claim capital allowances for furniture used inside a property which is let out commercially as furnished holiday accommodation for at least 140 days a year (other conditions also apply).
Before 6 April 2013, the taxman allowed landlords of unfurnished and partly furnished properties to claim for the cost of items provided in those properties under the “renewals basis”. Now the taxman has changed his guidance, saying that claims for “renewals” can only apply to small items such as toasters, lamps, or rugs.
This denies a tax deduction for the cost of larger loose items such as fridges, cookers, carpets and curtains. The cost of replacing items which are fixed to the building, such as a fitted oven or hob in a fitted kitchen, are counted as “repairs”, and are deductible as described above.
However, law still allows deductions for “any implement, utensil or tool” used for the rental business. The taxman is interpreting this to mean only small value items, but the law makes no reference to the value of things that qualify as an “implement, utensil or tool”.
If you want a tax deduction for say the cost of the washing machine you have replaced in your let property, you can choose whether to follow the taxman’s opinion or the law. If you chose to go against the taxman’s opinion and deduct the cost in your accounts, we recommend you explain what you have done in the white space on your tax return.
Talk to us about the risks and benefits of claiming for items against the taxman’s guidance.