First tax return- deduct rewiring cost against profit?

[loobylouuk]

Hi am trying to fill in my tax return and although i am using the guide notes am having difficulty on this one.

Before letting my properties out a couple of them needed rewiring to bring them up to safety standards else they would have failed the safety inspection.
can i include this as a tax deductable expense?
thanks
Lou

[King_Maker]

Possibly.

How much was the cost in relation to the property?

[Telometer]

I cannot see why the value of the works as a proportion of the value of the property makes any difference.

These are works preparatory to first letting, and as such are capital. You can only get a tax offset against the capital gain when eventually you sell.

[King_Maker]

I cannot see why the value of the works as a proportion of the value of the property makes any difference.

These are works preparatory to first letting, and as such are capital. You can only get a tax offset against the capital gain when eventually you sell.

I would disagree, if they are minor (relatively speaking).

Not all "preparatory works" are automatically capital.

[Telometer]

Not all "preparatory works" are automatically capital.

Indeed, as proved in Odeon Cinemas. But rewiring... Asset acquired cheaply in a defective state viz the case Law Shipping. A much misunderstood point of tax law.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM35455.htm

[King_Maker]

It is still my opinion that one needs to know the extent of the "defective wiring" before coming to a conclusion on whether the expenditure is capital or income.

[MrShed]

My reading of this is that he is implying an entire rewiring of the properties, which would(IMO) be classed as capital, not a maintenance cost.

[loobylouuk]

Possibly.

How much was the cost in relation to the property?



Well the property was about £140,000 and the part rewire approx £1000.

could i put it in as an expense and see if it questioned? there is no where on the form to put what the expense was!.....or will i immediately be sent to prison for fraud!!
Lou

[MrShed]

Do you already claim the 10% tax relief for FWaT? Or not?

[loobylouuk]

Do you already claim the 10% tax relief for FWaT? Or not?

sorry Mr Shed as a newbie i am unsure of FWaT....but i have not claimed for anything so far, the property is let unfurnished.

[MrShed]

Fair wear and tear - and as wickerman said, probably not highly relevant anyway :)

[loobylouuk]

If you have invested significant capital into a property to get it ready it is unlikely you will have any tax liabiilty anyway - just the 10% wear and tear and your mortgage interest payments should see to that![/QUOTE]

ha,ha.. you're right,infact i think the tax man owes me!

[MrShed]

Sorry Wicker - tax isnt my strong point. But I thought that the 10% FWaT (FWT/FTW :D) allowance covered all direct maintenance costs of items in the property with a finite lifespan? IF this was classed as maintenance and not capital expenditure?

As I say, sure I am wrong!!

[MrShed]

Fair enough - thanks for clarifying :)

[Telometer]

Not sure of the relevence of FTW against a rewire cost.

I would put a rewire down as capital, as would I a DPC course, new kitchen and bathroom etc.

Double glazing would count as revenue.

In fact I have done this for quite a few properties without eyebrows being raised by the accountant.

No, no no no no. (Or yes yes yes yes yes.)

Confusion still reigns supreme on this forum. Read this (which I posted above) http://www.hmrc.gov.uk/manuals/bimmanual/BIM35455.htm

Following acquisition of a new property, it is likely that all costs to bring it up to lettable standard are capital. The BTL brigade (unless buying off plan) invariably buy run-down properties that they do up before letting. These costs are capital.


Subsequent works to the properties - rewiring, new kitchens, bathrooms, roof, glazing (even replacing single with double) etc. etc. is all tax-deductible revenue expense.


Further confusion: FW&T/W&TA. The W&TA is 10% off net rent (after council tax, electricity etc.) as a tax deduction on FURNISHED lets - which is an alternative to a tax deduction for subsequent replacement of furniture. FW&T is a term in a letting contract.

[loobylouuk]

No, no no no no. (Or yes yes yes yes yes.)

Confusion still reigns supreme on this forum. Read this (which I posted above) http://www.hmrc.gov.uk/manuals/bimmanual/BIM35455.htm

Following acquisition of a new property, it is likely that all costs to bring it up to lettable standard are capital. The BTL brigade (unless buying off plan) invariably buy run-down properties that they do up before letting. These costs are capital.


Subsequent works to the properties - rewiring, new kitchens, bathrooms, roof, glazing (even replacing single with double) etc. etc. is all tax-deductible revenue expense.











Further confusion: FW&T/W&TA. The W&TA is 10% off net rent (after council tax, electricity etc.) as a tax deduction on FURNISHED lets - which is an alternative to a tax deduction for subsequent replacement of furniture. FW&T is a term in a letting contract.




So it should be put down then?...it was done prior to letting.

[Mrs Jones]

Now I know why I decided to pay an accountant (not very much actually) to sort out my tax return each year!!

[Telometer]

No, no no no no. It is capital, so goes into the CGT computation when you sell.

[King_Maker]

If it was an exam question, I would tend towards classifying it as capital expenditure.

It's the legal standard of the wiring that might sway it capital-wise, for me.