In calculating the profit or loss of a rental business the on-going costs of renting a property (agents’ fees, repairs, insurance, etc.) being ‘revenue costs’ are allowable immediately as a deduction against rental income received.
No deductions are allowed for capital expenditure but capital allowances may be claimed to take into account the depreciation of some capital assets used.
Ascertaining whether a cost is revenue or capital expense can be difficult, but HMRC have published a ‘Toolkit’ which is in the format of questions to help in deciding under which heading the expenditure may be allowed.
Example:
The current edition of HMRC’s Toolkit ‘Capital v Revenue Expenditure’ is dated June 2014.
The weblink is:
www.hmrc.gov.uk/agents/toolkits/capital-v-revenue.pdf
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