By: Anne Wilson
‘You may recall from our budget presentation that I mentioned the changes to relief on certain expenses for properties let unfurnished and the lack of clarity in the new guidance.
See the ICAEW article below for an update.
Personally I think that this is a very unfair position for the Revenue to adopt particularly when so many young people are struggling to get on the property ladder and have no choice but to rent.
Will they be forced to live with grotty white goods that don’t work properly because the landlord does not get tax relief to replace them?’
In a previous news item we highlighted that from April 2013, the tax concession which allowed landlords of unfurnished properties to claim for the replacement of white goods in an unfurnished property had been withdrawn.
After this, ICAEW Tax Faculty wrote to HMRC, jointly with the Chartered Institute of Tax, asking for clarification following the withdrawal of ESC B47: can relief be claimed for the replacement of white goods in an unfurnished residential let? We now have HMRC’s reply and the correspondence is published in TAXGUIDE 04/14.
The response from HMRC is that in its view no claim can be made for stand-alone white goods, as they do not qualify for relief under s68, Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) which applies to capital items of a relatively low value and not, for example, a fridge.
If the white goods are integral in a fitted kitchen then replacement could be claimed as a repair but there is no tax relief for replacing them on a stand-alone basis. When the consultation on the withdrawal of ESC B47 was published, HMRC had very little response. But that could be because HMRC’s background note said: “…. relief will be available either under Section 68 ITTOIA 2005/Section 68 CTA 2009 or, for furnished lettings, under the wear and tear allowance at Sections 308A to 308C ITTOIA 2005” – which would have reassured readers who might have had a concern on first learning that the ESC was to be withdrawn.
We suspect the change in policy will come as a surprise to many landlords as they complete their self assessments for 2013/14 – that is if unrepresented landlords even realise there is a change. The notes to the SA105 for 2013/14 highlight the change, but without an alert many taxpayers may not consult the notes.
HMRC will continue to monitor the impact of the withdrawal, so the door on relief may not be fully closed.