The Landlord - Some Good News
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landlord has perhaps always felt something of a tax victim.
The Entrepreneurs Relief
(ER) lifetime limit to
take advantage of a 10% rate of tax increases to a tantalising £5
let property does not qualify for ER whereas let property did qualify
previous Business Asset Taper Relief (BATR) which resulted in a 10%
Capital Gains Tax.
make it worse for the landlord, the National Press
have also reported that the special tax evasion team have collected
in Capital Gains Tax (CGT) by constantly reviewing the Land Registry
for “buy to let” landlords who sell property.
Many such landlords have often found that their mortgage
the rent received and they are so used to the principal private
relief (PPR) advantage for CGT that they do not realise that CGT is due
sale of a let property if a profit has been made.
there is some good news for landlords regarding
a recent tax case C Wills v HMRC TC00479.
In this case “Wills” found
extensive repair was incurred to make a property safe it was not
treated as capital
for tax purposes and therefore allowed against the rental income as tax
allowable – very positive.
facts are that “Wills” had income from property
lettings and incurred costs repairing one of the properties and its
argued these costs
were capital in nature, “Wills” wanted to defend the fact that these
facts were that the outbuilding, a listed
building, was used in a variety of ways.
Prior to the repair work carried out by “Wills”, it had
been used for
storage, as a games room and generally as additional living
space. The outbuilding was in a
very bad state of
repair and as a result was becoming dangerous.
In undertaking such extensive repair work as was
necessary, it was
sensible for the owner to modernise the interior at the same time
heating, electric power points and a water supply.
After the repairs the outbuilding was used as
a games room and studio as well as for storage: not hugely different to
previous use just more safe.
argued that the costs were capital because they
had improved the living area available and the property could now be
more money. The
Tribunal found that the
rent before and after the renovations had changed only in line with
and also that the use of the space before and after the work had not
fundamentally changed. The
work had to be
performed to some extent to make the property safe and it seemed
that the extra work was performed at the same time.
The costs were therefore allowable as repairs
as opposed to having to be of a capital nature, thus achieving the
for immediate income tax relief.
About the Author
Article supplied by Julie
Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire,
01962 735544. Email;
Julie Butler F.C.A. is the author of Tax
Farm and Land Diversification ISBN: 0754517691 (1st
ISBN: 0754522180 (2nd edition) and Equine
Tax Planning ISBN:
third edition of Tax
Planning For Farm and Land Diversification will be published
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Article Published/Sorted/Amended on Scopulus 2010-10-22 12:32:48 in Tax Articles