By Judith Loeffler

have your say

Following the announcement to remove the 10% wear and tear allowance for furnished properties as of the tax year 2016/2017, the consultation on the reform has now started. The declared purpose is ‘to improve the consistency and fairness in the taxation of residential property businesses’.

HMRC is now inviting  feedback on the proposed scope of the measure as well as on the amount of relief suggested: ‘We would like to hear from businesses, individuals, tax advisers, professional bodies and any other interested parties involved in the letting of residential property’. The Consultation will run for 12 weeks from 17/07/2015 to 09/10/2015 and the full consultation document is available here.

The summary of the proposal:

  • Remove the 10% wear and tear allowance for furnished property – this is currently available, independent of whether any money has actually been spent on the property.
  • Introduce a new replacement furniture relief which will apply to all residential rental properties, furnished or unfurnished – the initial cost of furnishing a property would however not be included.
  • Landlords will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use including furniture, televisions, fridges and freezers, carpets / flooring, curtains etc.
  • Fixtures integral to the building would not be included because the replacement cost of these would, as now, be a deductible expense as a repair to the property itself. This includes baths, basins, toilets, boilers and fitted kitchen units.

Under the new proposal, tax relief can only be claimed for expenses that are actually incurred by landlords which HMRC believes will provide a better incentive for landlords to actually maintain the furnishings in their property. No relief can be claimed without actual expenditure. The new replacement furniture relief will give relief for the cost of the replacement asset, less any proceeds received from the old asset that is being replaced.

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