28 May

HMRC explains tax process for landlords

HMRC explains tax process for landlords

HM Revenue and Customs (HMRC) has clarified how tax relief on furnished and unfurnished properties is dealt with in terms of fixtures and fittings in let properties.

The government department has contacted the Chartered Institute of Taxation to ensure that landlords and accountants are more aware of how the allowance can be applied and the limits in place.

HMRC policy and technical specialist Jas Bhanghu explained that the renewals allowance has a narrow application and will only apply to so-called short-term life replacements.

"This would relate to short-life items like crockery and rugs that a landlord might expect to replace every year or so," said Mr Bhanghu.

"However, the allowance does not apply to carpets or higher value items that landlords would not expect to replace that often. However, relief for this expenditure is available as a revenue expense."

He also attempted to clarify the issues that some landlords have raised over replacement of white goods.

The HMRC advice said: "They are capital items, but HMRC accepts where they are integrated appliances they would be deductible as a repair when replaced.

"Free standing white goods are not capital items and capital allowances are not available for furniture and household equipment provided for use by tenants in residential property."

The current ten per cent wear and tear allowance remains the same but will only apply to a buy-to-let property or multiple occupation let that has been rented out with enough furniture to allow the home to be used for normal residential purposes.

Landlords and letting agents may also be interested in recent figures from the Association of Independent Inventory Clerks (AIIC) that show cleaning was the leading source of complaints under the deposit protection scheme.

Introduced in 2007, the initiative has seen a rise in cleaning-based disputes from 49 per cent in 2009 to 56 per cent in 2013 - the highest level since the scheme was launched.

Pat Barber, AIIC chair, stated: "We are seeing a sharp rise in the number of properties that require professional cleaning services at check-out and it is a growing problem.

"The main problems are dirty ovens and fridges; stains and marks on carpeting and flooring; bathrooms which have not been cleaned for months; and pet hair and excrement on floors, furniture and soft furnishings."

She also added that many tenants are unaware of the cost of professional cleaning services and they often believe that cleaning issues should be classed under general wear and tear.

Ms Barber urged landlords to make sure tenants are told of their cleaning obligations before they sign the letting contract, as well as ensure that a through check-in and check-out is completed so there can be no confusion about the state of the property.

Tenants are legally required to make sure the condition of the property remains the same over the renting period i.e. if the home is classed as clean at the time of check-in, it must be that way when the renter departs.ADNFCR-1222-ID-801723783-ADNFCR

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