Capital or revenue expenditure

[Sheila]

Is replacing:

a) a broken bath and wc
b) old fitted kitchen with new fitted kitchen

revenue or captal expense? They have both been replaced with units of equivalent standard (although newer obviously)

Is it possible to deduct these sorts of items from the rent when calculating tax?

[steve@nunn-hayward.c]

Hello Sheila,

The distinction between revenue and capital has been the subject of much argument and litigation over the years. The problem is that this area is a grey one subject to interpritation of the facts.

Revenue booklet IR150 sets out the official view and does give a reasonable overview.Your local tax office should be able to send you a copy.

I would suggest that a claim seems in order, but on the proviso that full details are disclosed in your Self-Assessment Tax Return as to these expenses. On this basis you may receive an "enquiry" and have to argue the point, but if not you will then avoid the revenue being able to "discover" in later years that your Tax return was incorrect.

I would of couse be pleased to discuss with you providing assistance with this particular aspect of your affairs if you wished me to look into this matter in more depth for you.

Regards

Steve Cook , ATII
Tax Partner
Nunn Hayward, Chartered Accountants
01753 888211

[taxman]

Hello
I agree with the above and would make the following points:

- Full disclosure of the doubtful treatment must be provided with the return if you are to prevent the IR raising a discovery assessment ( i.e an assessment outside the normal 12 months deadline).
- If the Inspector successfully argues that the items are captial, ad you have treated them as revenue then interest will be charged on outstanding tax.
Unlikely to be any penalties given the circumstances.
Finally I would be tempted to argue that broken bath is revenue and kitchen is capital, due to element of repair/improvement. however it does depend on the facts.
regards