Rental guidance

HMRC have responded to a joint query by the Chartered Institute of Taxation (CIOT) and ICAEW on the withdrawal of Extra-Statutory Concession B1 (ESC B1 and ESC B47) concerning the renewals basis for residential let property and whether relief remains available for expenditure incurred in replacing items such as white goods, furniture and soft furnishings according to Harris & Co accountants Northampton

In their response, HMRC clarify that ‘where the white goods are fitted (i.e. integrated hobs and ovens), we recognise these are part of the entirety (the property) and so these would be deductible as a repair when replaced’ and that ‘anything free-standing, such as a fridge freezer, will not become part of the entirety (the property) for residential lettings and therefore would not be deductible’.

HMRC say they will continue to review the impacts of the change.

CIOT is concerned that both tenants and landlords will lose out as a result of HMRC’s removal of the relief. Brian Slater, Chair of CIOT Property Taxes Sub-Committee commented:

‘The concession, as it previously existed, provided incentives for private landlords to maintain their properties by offering tax relief for the costs of replacing white goods and other furnishings. Additionally, tenants who might otherwise have been forced to manage with worn out furnishings and broken fridges benefited from the replacements. This incentive no longer exists, likely creating an increased level of tension between landlord and tenant over costs and maintenance.’

‘Additionally, what can be classed as a ‘replacement’ or a ‘repair’, is sometimes complex turning on fine distinctions. While the Government has been taking real steps to engage with landlords and help them understand the taxes which affect them, the removal of this tax relief will only create more confusion, apparently denying relief for what is quite rightly seen as a legitimate business cost.’

HMRC’s response is available here.