Relief for Rental Property Repairs

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So, you’ve bought a rental property and once extensive repairs have been carried out to bring the property to a habitable state, you assume that you can offset said expenditure against your rents, thus receiving income tax relief? You may be shocked to learn that this tax treatment could in fact be wrong!

If a property is purchased in a dilapidated condition and you have paid less than the market value as a result, then works involved in bringing it up to standard could be capital expenditure and should therefore be relieved when you dispose of the property.

Even after acquisition, works that significantly alter or enhance the asset are likely to be capital expenditure and you must check with your tax advisor before claiming them as a rental expense on your tax return. An extension, for example, is likely to be a capital enhancement.

On the contrary however, if repairs carried out simply to reinstate the asset to its original condition,  then it is probable that you can offset the expense against rents received in the year in which it is incurred.

For more information please contact Green & Co Accountants and Tax Advisors on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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