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Where Taxpayers and Advisers Meet

capital and revenue expenses

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am
capital and revenue expenses

Postby someone » Wed Dec 15, 2021 5:40 pm

If a (let) property is currently EPC-D and needs cavity wall insulation to bring it up to EPC-C I assume that currently that would count as a capital expense.

If that work is done after it becomes mandatory for let property to be EPC-C would it make any difference to the revenue/capital nature of the expenditure?

I assume that adding more loft insulation would also be capital in nature (that hasn't actually been suggested but given that the insulation that is present was installed in the 80s when the property was built, I assume that current standards would suggest more than is currently installed.) but if, for example, the existing insulation was replaced with new to current building standards would that then possibly come under the "incidental improvement" exception? (I detest fiberglass so unless the price is vastly different, replacing with rock wool rather than just overlaying with rock wool would be my preference even if I won't be living there and even if it is exclusively capital in nature)

The other thing I'm considering is roof solar panels - I assume there's no way that can be anything other than capital expenditure (don't need a new roof).

pawncob
Posts:4877
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: capital and revenue expenses

Postby pawncob » Thu Dec 16, 2021 10:44 am

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca22220

As indicated above, expenditure incurred by a person carrying on any qualifying activity (including a property business) in adding insulation against loss of heat to a building used for the purposes of that activity generally qualifies for PMAs. But this entitlement is subject to the specific exclusion (CAA01/S35) in the case of P&M for use in a dwelling-house, which does not qualify for PMAs.
With a pinch of salt take what I say, but don't exceed your RDA

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am

Re: capital and revenue expenses

Postby someone » Fri Dec 17, 2021 2:17 am

Thank you.

I don't fully understand that page, but I did know that capital expenditure for a residential let isn't treated the same way as for other businesses.

I think it all means that it's not a revenue expense. I cannot tell if it would reduce any gain on eventual sale but I guess that's a question that can be addressed if/when we sell.

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: capital and revenue expenses

Postby bd6759 » Sat Dec 18, 2021 11:18 am

The expenditure modifies a fixed asset, so I’d very likely to be capital expenditure.

It should be allowed as a deduction under s38(1)(b) if it enhances the value of the asset.

someone
Posts:544
Joined:Mon Feb 13, 2017 10:09 am

Re: capital and revenue expenses

Postby someone » Sun Dec 19, 2021 8:57 am

The expenditure modifies a fixed asset, so I’d very likely to be capital expenditure.

It should be allowed as a deduction under s38(1)(b) if it enhances the value of the asset.
Many thanks. I'll make sure to keep records.

Feels wrong to me that costs that are (will be) required by law to keep a letting business going aren't allowable as revenue costs. But that's what it is and we might as well do the work sooner rather than wait for it to be mandatory.


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