Carrying on from our August article on tax relief on wear and tear of furniture for let property, this article sets out guidelines for tax relief on the replacement or repair to integral parts of the let building.

Normally tax relief can be given against rental income for the repair of an asset, i.e, the restoration of that asset by replacing subsidiary parts of the whole asset. If there is significant improvement to the asset beyond is original condition, then the expenditure will be classified as capital expenditure and relief will not be available against rental income. Consideration needs to be given also to the ‘entirety’ of the subject being repaired,  for example, if the roof of a let property is damaged, the replacement of the damaged area is a repair and the expenditure allowable against the rental income.

Examples of repairs that are normally deductible in computing rental profits are:

1. Exterior and interior painting and decorating
2. Stone cleaning
3. Damp and rot treatment
4. Mending broken windows, doors, furniture and machines such as cookers and lifts
5. Re-pointing
6. Replacing roof slates, flashing and gutters
7. Replacing windows even if single glazed windows are replaced with double-glazed windows

Generally if the replacement of a part of the ‘entirety’ is like-for-like or the nearest modern equivalent, the expenditure is allowable against the rental income. For example, if a fitted kitchen is refurbished by removing the existing units, sink, worktop etc, and replacing with a similar standard kitchen, this expenditure will be a repair. If however, additional cabinets are fitted increasing storage space or additional equipment is installed, then expenditure on those items is capital and cannot be relieved against the rental income. If the whole kitchen is substantially upgraded and standard units replaced with expensive customized items using high quality materials, then all the expenditure will be classified as capital with no relief against rental income. Other examples of repair expenditure which do not give significant improvement to the property are the cost of replacing wooden beams with steel girders and replacing lead pipes with copper or plastic pipes. If however the steel girders were designed to take heavier loads or the pipes to take heavier pressure, the expenditure is likely to be capital.

Care needs to be taken when repairs are incurred after a property is acquired as to determine whether the expenditure is a repair allowable against revenue or is capital expenditure. If a property was acquired not in a fit state to let until the repairs had been carried out, then the repair expenditure will be capital. If there is expenditure which adds to or improves the land or property such as converting a disused barn to a dwelling to be let, this will be capital expenditure.

Separate tax relief may be available for capital expenditure on a property or on certain plant and machinery within certain buildings such as a lift but this will be the subject of another article.

Please contact us if you require further advice concerning the tax implications of let properties.