Landlords are being advised to wait until the 6th April to replace any furniture in their property.
Accountants Blick Rothenberg LLP are guiding landlords to wait until after this date, when the 10% wear and tear allowance is replaced. These costs will then become deductible under a new relief.
Changes
Robert Pullen, personal tax manager at Blick Rothenberg noted: ‘from April 6 2016, the favorable 10% wear and tear allowance for fully furnished residential properties will no longer be available.’[1]
‘Instead, only the actual costs incurred in replacing furniture, furnishings, appliances and kitchenware provided for the tenants’ use will be deductible. Initial costs are not allowed, only the replacement of such items. The Government expects this measure will bring in around £165 million/year from 2017 onwards,’ he continued.[1]
Pullen went on to say that, ‘this is a significant step away from the wear and tear allowance, bringing the position more in line with general deductibility of repair costs or replacing toilets, boilers etc. Landlords of fully furnished properties will feel this change adds additional complexity to an increasingly complicated area of deductible costs, following closely on the heels of the restriction to finance cost expenditure.’[1]
Landlords told to wait to replace furniture
Relief
Mr Pullen sees the changes as good news for landlords owning part or unfurnished homes, who will now be able to claim the new relief. At present, landlords do not generally receive much relief for associated costs after changes brought in from April 2014.
HMRC have pledged to provide ‘comprehensive guidance’ on the more complicated areas of whether a replacement is considered an improvement or not. Where the furniture is replaced to a modern equivalent, the improvement as a result of technological advances should be ignored, so that the cost is allowed in full.
However, qualifying furnished holiday lets and commercial buildings are not covered by these rules. As such, relief on the initial cost of items, as a well as replacements, remain allowed.
[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/landlords-advised-to-wait-until-april-to-replace-furniture