Historically, landlords with unfurnished rental properties were permitted to claim 100% tax relief by claiming the ‘renewals allowance’ for the cost of replacing furniture. However this renewals allowance was removed by HMRC on 6th April 2013 and there has been considerable uncertainty amongst landlords regarding the tax relief for repairs and renewals, prompting HMRC to recently clarify their position.
Under the new regulations, landlords are unable to claim a deduction for the cost of replacing items of furniture which include white goods, such as fridges, freezers and free standing cookers. It also means that tax relief is no longer available in respect of replacing carpets and curtains. As such this could represent a significant financial blow to many landlords. There is, however, a concession that integrated white goods, such as fitted washing machines, constitute part of the property itself and, as such, tax relief will be allowed in respect of the replacement of these items. Tax relief will also be available in respect of equipment such as boilers, water heaters and air conditioning systems provided that less than 50% of the system is being replaced.
It should be noted that the removal of the ‘renewals allowance’ is only relevant to the letting of unfurnished properties and that the 10% wear and tear allowance will still be available in respect of furnished rental properties, provided that the property contains sufficient furniture to warrant the ‘furnished’ status. There have been stories recently of HMRC rebutting the claims that rental properties are furnished on the grounds that insufficient crockery and cutlery were provided by the landlord. Similarly, rental properties which qualify as ‘Furnished Holiday Lettings’will be unaffected and continue to be eligible for capital allowances in respect of replacing furniture and fittings.
If you are a landlord and have any uncertainty about what tax reliefs are available, you should contact your accountant for guidance.