The taxman is becoming quite adept at sleight of hand tricks, whereby tax rules and reliefs are mysteriously changed or removed overnight.  On such relief was for landlords of unfurnished properties and the withdrawal of what was known as the ‘renewals’ relief.  Under this practice landlords could claim relief for the renewal of items in their rental properties such as; fridges, carpets, curtains, beds etc.  From 6 April 2013, the taxman made the renewals basis disappear, leaving landlords potentially out of pocket, when renewing items in their properties.

Landlords who let properties fully furnished were not able to claim the renewals relief but are entitled to an annual wear and tear (W&T) allowance based on 10% of the rental charges, and this was intended to cover the costs of renewals.  The W&T allowance is still available and this has led to a somewhat uneven pitch for landlords.

The good news is that the taxman is aiming to level the playing field for landlords.  HMRC have published a consultation document in which it discusses proposals to replace the W&T allowance with something that looks remarkably like renewals relief!

Under the proposals the initial cost of furnishings etc. will not be allowed as a deduction against rents (like it was under the renewals relief).  The cost of renewing items provided for the tenant’s use in a rented property will be allowable as a deduction (as was the case under renewals relief).

It should be noted that fixtures integral to the property such as baths, fitted kitchen units and boilers are not included.  However these costs would normally be allowable as a repair the property.

So as I see it, the result of the new proposals are to remove the W&T allowance for landlords of fully furnished properties and reinstate a sort of renewals relief for all landlords.

If the proposals go ahead the changes will come into effect from April 2016, so landlords may need to look closely at the timing of replacing items in their buy to let properties.

The consultation can be viewed on the GOV.UK website  at  https://goo.gl/eIz4De.

The consultation will be open until 9 October 2015 and any responses should be e-mailed to wearandtear.replacement@hmrc.gsi.gov.uk before that date.

We advise clients on all aspects of their rental income business, it makes sense to talk to us.