20 October 2010, Vol 166 issue 4277 entitled "Pre letting costs: An elderly client has had to move into a nursing home and her house is to be let to provide an income. Can the costs that have been incurred to make the property suitable for letting be allowed against income?
The estate agents advised that before her bungalow could be let, it would have to be completely modernised and brought up to date. The costs of refitting the bathroom, kitchen and central heating are, I assume, not allowable. However, a lot of the costs were of a repair nature, i.e. decorating, retiling the bathroom and kitchen, gutter clearance, boiler service and safety certificate, roof repairs and rewiring of the electrical circuits and supply."
There are three published responses (online), all of which are very bullish on obtaining a revenue deduction.
Law Shipping is mentioned in only one response, and is passed over very quickly as an obstacle as it applied to "repair work combined with a change of ownership," and there is no such change in this case. I am far from convined that Lord Clyde refers to change of ownership rather than to starting a business. In Odeon cinemas, remember, the possibility - and reality - of using the asset without undertaking the repairs is a key point in establishing an argument for deductibility. Clyde's comments on Law Shipping here:
It is obvious that a ship, on which repairs have been allowed to accumulate, is a less valuable capital asset with which to start business than a ship which has been regularly kept in repair. And it is a fair inference that the sellers would have demanded and obtained a higher price than they actually did, but for the immediate necessity of repairs to which the ship was subject when they put her in the market…Again, when the purchasers started trade with the ship, the capital they required was not limited to the price paid to acquire her, but included the cost of the arrears of repairs which their predecessors had allowed to accumulate; because, while their own trading with her would - in ordinary course - provide a revenue out of which the repairs incidental to such trading would be met, it would be unreasonable and abnormal - in any commercial sense - to saddle such trading with the burden of arrears of repairs incidental to the trading of their predecessors from which the purchasers derived no benefit.
"Wholly and exlusively" similarly is mentioned only briefly, without considering whether the repair costs might not in fact relate to the period of private use and therefore be otherwise than w&e for the purposes of the rental business.
