PDA

View Full Version : Refurb


Rye
07-11-2010, 14:51 PM
Hi all. I'm about to start refurbing the kitchen and bathroom of a BTL property that I have owned for the past 9 years. I'm not sure however, how to apportion some of the costs. I intend to replace everything in the kitchen like for like but I will also be adding a cooker and extractor hood for the first time. As these are not "replacements" I'm not sure I can offset them against income tax. The same applies to the bathroom where I will be adding a shower and extractor for the first time. Do I need to offset these against an eventual CGT bill? Many thanks in advance for any advice.
Telometer
08-11-2010, 08:36 AM
As they are not replacements you are not permitted to offset them against your profits chargeable to income tax (N.B. not against income tax). If the cooker and extractor hood are built in then (PROVIDED they are still in the property when it is sold) then they may be offset in calculating your CGT bill (N.B. not against the CGT bill). Likewise in the bathroom.
Rye
08-11-2010, 09:29 AM
Many thanks. It is as I suspected but thought I'd better check. Just to get hypothetical, what happens if I have to replace the cooker again before I sell? Would that still be a CGT issue?
Telometer
08-11-2010, 10:26 AM
(Assuming the cooker is built in.) The replacement of the cooker is then a revenue item. Upon eventual sale, the property still has the original cooker, so it is deductible for CGT purposes.

e.g.
2000 Buy property
2005 spend £500 on a built-in cooker where there was not one before
2010 spend £1,000 on a replacement cooker.
2015 sell property

So you get a deduction for £1,000 in 2010, and you obtain CGT relief for the £500 in 2015.

Alternative scenario

2000 Buy property
2005 spend £500 on a built-in cooker where there was not one before
2010 spend £1,000 on a like-for-like replacement built-in cooker.
2014 remove built-in cooker and put in new kitchen with freestanding cooker costing £1,500.
2015 sell property.

You never get relief for the £500 cooker as it's no longer reflected in the state of the asset on sale. You get no relief for the £1,500 cooker either.