Residential Landlords beware.... things have changed
Property Tax Renewal Basis - a cruel change hit residential landlords that could affect your 2014 Tax Return! It was announced in the 2013 budget and after dispute with the profession has only now been clarified
Namely the loss of the Renewals Basis..... Let me explain.....
Residential Landlords cannot claim Capital Allowances on equipment provided in let property. However, for many years they have been able to claim replacement of equipment as a cost under the renewals basis. This entitlement was withdrawn with no alternative provided in the 2013 budget.
So what does it affect?
For a start it does not affect setting up costs. Getting property into a state fit to let has never been allowable expenditure, although improvements will be allowable against the capital gain when the property is sold (see the Hornbeam guide for tips how to get relief for "doing up" your property).
Secondly, it does not affect maintenance and repair costs to the property, and HMRC have helpfully clarified that it does not affect renewals of fitted equipment such as fitted ovens and fitted fridges.
Thirdly, it does not affect things outside the front door of the let property, such as the lifts in a block of flats, or the landlord's van and tools, these all still attract Capital Allowances.
Fourthly, it does not affect small consumable items, such as cutlery, doormats, or waste bins etc.
So the things most likely to be affected are carpets, curtains, free standing kitchen appliances and furniture.
HMRC consider the affect likely to be small. We disagree, for most residential landlords these are significant cost items!