capital costs/expenditure

by **petergibbinson** on Mon Jan 30, 2012 6:28 am

Hopefully reasonable simple question..
New property purchased to rent out furnished, other properties already owned furnished and let out using the 10% w&t allowance calculation, my understanding is I have to use the same basis here from the outset.
Costs associated with the purchase (legal fees, stamp duty, surveyors costs etc) all capital costs
Can the cost of purchasing furniture to furnish the property intially be included as a capital cost, to set against any future capital gain? I realise any future replacements are not allowable in any way as the 10% w&t allowance accounts for this, but what about the initial cost of purchasing the items..capital cost? Or not allowable in any way?

by **Peter D** on Mon Jan 30, 2012 7:45 am

Good morning Peter.
I'm afraid the initial furniture costs can not claimed.
http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm
Regards Peter

by **mullet** on Mon Jan 30, 2012 9:46 pm

Can the cost of purchasing furniture to furnish the property intially be included as a capital cost, to set against any future capital gain?

No, because furniture will rarely become part of the asset. Such expenditure is not "on the asset" - Section 38(1)(b) TCGA 1992. (The asset in that context being the property itself).

by **petergibbinson** on Tue Jan 31, 2012 2:48 am

Thankyou that makes sense, I presume anything fitted (i.e fitted wardrobes/sliderobes) or a fitted study, would be allowable as a capital cost, as it becomes integral to the building? (assuming they are new and not merely replacements on a like for like basis, when they would be classed as revenue rather than capital expenses)

by **mullet** on Tue Jan 31, 2012 8:26 pm

I presume anything fitted (i.e fitted wardrobes/sliderobes) or a fitted study, would be allowable as a capital cost, as it becomes integral to the building?

Not necessarily. To be allowable such expenditure has to be capital in nature and incurred on the asset for the purpose of increasing the value of the asset, and be reflected in the state or nature of the asset at the time of disposal. Would fitted wardrobes or a fitted study increase the value of the asset? Possibly. But they could equally reduce the value of the asset.

The allowable enhancement expenditure argument is fairly simple with loft conversions, extensions and conservatories. A greatly improved kitchen or bathroom should be treated as enhancement expenditure. But I don't think it's so clear cut with something like a study or bedroom. I suspect we agree that £100 worth of IKEA units/desk fixed to a study wall would not be allowable enhancement expenditure but a fitted £3,000 office suite would be allowable. Where is the line? When does (or doesn't) fitted units/furniture become part of the premises?

by **petergibbinson** on Wed Feb 01, 2012 10:18 am

Yes sorry I meant substantial fitted study, or 3k on sliderobes etc...
The old revenue vs capital debate, and it's almost impossible to agree...you raise an intereting point though... a swimming pool is substantial but in a lot of properties would be deemed to not add value or even decrease value in a smaller property (does that preclude it from being a capital expense and make it a revenue expense?!)
A boiler might be a substantial imporvement, but I've never known one increase the value of the property! (yet a lot of people deem it to be a capital cost)