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Where Taxpayers and Advisers Meet

Allowable expense in renting property

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm
Re: Allowable expense in renting property

Postby section 44 » Thu May 08, 2014 1:36 pm

I'm not sure whether its abundantly clear that say a washing machine is a tool for somebody carrying on a property letting business.

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Allowable expense in renting property

Postby Lambs » Thu May 08, 2014 1:44 pm

It doesn't need to be a "tool" per se. it needs merely to be an article used in the "trade", which by virtue of s 272 means also "property business".

I trust you will accept that "article" is a very broad term, and could easily include an item of furniture provided by the owner of the business to a business customer, in a business capacity and for the furtherance of the business, such as in the decision of whether or not to rent by a prospective tenant - "this property's got a washing machine".

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Allowable expense in renting property

Postby section 44 » Thu May 08, 2014 2:13 pm

I trust you will accept that "article" is a very broad term
Perhaps not. If article should be interpreted as meaning an article of a similar kind to an implement or utensil then that might be a problem for say a washing machine and perhaps might justify why HMRC consider small items to be different. It depends how article should be interpreted for these purposes.

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Allowable expense in renting property

Postby Lambs » Thu May 08, 2014 3:01 pm

Well, I am sure that if the original draftsmen had so intended they it wiuld not have been beyond their wit to say "or similar article" rather than "any article". But then the original draftsmen never referred to "tools" in the first place. Nordid anyone me tion "small". Ever.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Allowable expense in renting property

Postby section 44 » Thu May 08, 2014 3:11 pm

Well, I am sure that if the original draftsmen had so intended they it wiuld not have been beyond their wit to say "or similar article"
Perhaps, although if that could be implied then the rule of ejusdem generis might be redundant

gone sailing
Posts:4
Joined:Wed Dec 18, 2013 7:57 pm

Re: Allowable expense in renting property

Postby gone sailing » Sat Jun 07, 2014 1:44 pm

I think the history is that, by omission, fridges didn't fit any existing definition.
Consequently HMRC allowed these by extra-statutory concession for many years.
Then there was a recent case that caused HMRC to remove all extra-statutory concessions ...
... which put fridges in 'no-mans land'.
Irksome to say the least.

AvocadoK
Posts:1232
Joined:Wed Aug 06, 2008 3:46 pm
Location:Lancashire

Re: Allowable expense in renting property

Postby AvocadoK » Sun Jun 08, 2014 8:27 am

Out of interest, the HMRC consultation document withdrawing the 'renewals' concession implied that the renewal of an item of plant (say a fridge) would attract relief under s68.

To quote the relevant para:

If the taxpayer’s qualifying activity is an ordinary property business or an overseas property business Section 35(2) of CAA denies capital allowances for qualifying expenditure incurred in providing plant or machinery for use in a dwelling-house. In such cases, relief will be available either under Section 68 ITTOIA 2005/Section 68 CTA 2009 or, for furnished lettings, under the wear and tear allowance at Sections 308A to 308C ITTOIA 2005.

Not sure if this was a careless/deliberate error, or did they just change their minds?

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Allowable expense in renting property

Postby Lambs » Sun Jun 08, 2014 4:51 pm

They changed their minds. Their newly updated BIM includes an example of a free-standing washing machine which they say, now, is ineligible for renewals basis deduction.

I disagree. But it seems that CIOT and ICAEW have given up the fight. Which I find incredible. By capitulating so publicly, they make it that much harder for other more determine parties to prosecute the case. Perhaps the policy has moved away from technical accuracy to highlighting the pronounced inequity. I don't understand why they were incapable of holding both lines.

Regards,

Lambs

AvocadoK
Posts:1232
Joined:Wed Aug 06, 2008 3:46 pm
Location:Lancashire

Re: Allowable expense in renting property

Postby AvocadoK » Sun Jun 08, 2014 5:14 pm

Agreed.
Mike Truman pointed out last year that in the Caledonian Railway Company case, the renewals basis applied to wagons. Let's hope someone has the stomach to take this to Tribunal (unfortunately I don't own any resi property!)
AK

gone sailing
Posts:4
Joined:Wed Dec 18, 2013 7:57 pm

Re: Allowable expense in renting property

Postby gone sailing » Sun Jun 08, 2014 6:38 pm

@AvocadoK, I wrote to HMRC about that paragraph and got a recognition that it was poorly worded.
What gets me is that somewhere in the "charter" they must have an instruction to give tax relief on legitimate business expenses.
If they've missed something it needs sorting.

As it turned out, my clients landlords with unfurnished properties (no W&T) don't even supply fridges so it slipped of my radar too.


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