Now that HM Revenue and Custom’s formal consultation deadline has passed, it seems almost certain that a major tax relief (the renewals allowance for fixtures, furniture, furnishings and moveable equipment) available to taxpayers who let out furnished and unfurnished houses will be withdrawn in April, 2013.
The allowance currently means that the like for like replacement of fixtures, furniture, furnishings and moveable equipment is tax-deductible against rental profits. This will not be the case after 5th April, 2013. So, if you own an unfurnished rental property and you know that, say, the cooker needs replacing, you should do it before April, 2013 to get tax relief.
Owners of furnished lets will continue to be able to claim the 10% wear and tear allowance. This is in place of claiming the renewals basis for furniture, furnishings and moveable equipment.
However, owners of furnished lets will also see their tax bills rise, as it will not be possible to claim for the cost of renewing fixtures (which can currently be claimed in addition to the wear and tear allowance). Fixtures are things which would not normally be removed if the property were vacated or sold (for example, baths, washbasins, toilets). As things stand, after 5th April, 2013, the cost of repairing a toilet is tax-deductible but not the cost of replacing it.
This is a complicated area. We hope this is clear. If you need further advice, please contact us.