Removal of Wear and Tear Allowance Consultation by HMRC

Having now read the HMRC article, I am in favour it.

1. It re-instates the renewals deductions for carpets, etc in unfurnished and part-furnished property.

2. It stops landlords of furnished properties that do little by way of replacing items from claiming significant tax deductions, which other taxpayers are subsidising; they will only be able to claim what they actually spend on renewals.

This is also beneficial to those landlords of furnished lets that spend more than 10% of income on renewals.
It also means if you have significant voids that reduce your income, you can still claim full cost of renewals.

Those who let furnished could delay spending on renewals until next tax year and get 10% this year plus actuals next year.

Reply to the comment left by "Jireh Homes" at "24/07/2015 - 16:23":

However, you have the choice as to where to buy and how to furnish it.

You can do the sums to see if it makes sense and continue based on that.

The taxpayer should not be expected to subsidise you just because you chose to buy and let in an expensive way.

This change is going to hurt me quite a lot. And yet I can't think of an argument against it - it seems a fair thing to do, even if there is more admin.

I could have refurnished all my flats every year for less than my 10% allowance. (Actually, I could have done it for half the value of the allowance but I opted for decent furniture, leather sofas, etc..).

As long as we are able to set off actual costs under the new regime, the change has to be a fair one. As Michael points out - claim your last 10% this year and delay as much expenditure as possible until the next.

I will focus my ire on the punitive new interest rules.

Reply to the comment left by "Dr Monty Drawbridge " at "26/07/2015 - 13:41":

I could have refurnished all my flats every year for less than my 10% allowance. (Actually, I could have done it for half the value of the allowance but I opted for decent furniture, leather sofas, etc..).

Average rent is £900 pcm. 10% W&T an that is £1080.

You could refurnish a flat to a decent standard with leather sofas etc for a grand?

How are you going to do that, ram raid John Lewis with a removals truck?

Reply to the comment left by "Monty Bodkin" at "26/07/2015 - 14:05":

Average let in London is £1,500pcm but the average is irrelevant - it should be case by case.

Mine are mostly iro of £1,750 - 2,000pcm for a two bed flat. So a £2,400 allowance. Which is just over what I paid for the furnishings. And they are 6-7yrs old and still going strong. Glass tables, leather sofas, Eames style moulded chairs all look much like when I originally bought them. My wardrobes are mostly built in. Only things I have really had to exchange are a couple of blinds, obviously the mattresses, and a few assorted bit and pieces - total £500-600. In that time I'll have had more than £15,000 in allowances for the flat.

Don't get me wrong - I've loved having that allowance. I am going to miss it. I just can't logically argue in favour of it.

Reply to the comment left by "Dr Monty Drawbridge " at "26/07/2015 - 15:14":

Even at £2400, you can't kit a property out to a new, decent quality standard with leather sofas etc for that price. Your comment at 13.41 is misleading or just plain wrong.

I do my fully furnished flats (not London) similar to your description. I get around £720 W&T. Some years I'm up, some years I'm down. Last year on one flat, I put down new flooring (£2K) and a washer dryer (£500), W&T allowance was £720. Fair enough, swings and roundabouts.

Average let in London is £1,500pcm

My figure was for the whole of the country.

This is not just about London. But it is a London solution to a London problem imposed on all of us. The obvious answer would be to cap W&T allowance at £1000 or even £500.

Removing it is anti business and piling on red tape.

Genuine fully furnished is a pain in the arse, a lot more work than unfurnished. Keeping records for every knife, fork and cushion will be a nightmare. Consider keeping such records for your own household... now times that by a dozen.

Landlords will stop doing it.

This hammers mobility of labour, not to mention student lets and HMO's.

It also opens up a cracking avenue for exploitation;

-New washing machine? No problem luv, keep the receipt for the tax return. 50" plasma for the kids' xmas present? No problem luv, keep the receipt for the tax return.

The moral excuse (should a landlord need one)? George Osborne is screwing me for 60% + tax, if he ain't playing fair, why should I?

He is hitting a minority of landlords whilst opening the back door of the sweetshop to all landlords (all landlords can now claim renewals whether part-furnished, furnished, unfurnished or just providing a complimentary Bentley) .

This is wrong on many levels.

But it is already a done deal, as you say;

"I will focus my ire on the punitive new interest rules."

Reply to the comment left by "Michael Barnes" at "26/07/2015 - 09:03":

Having now read the HMRC article, I am in favour it.

I don't blame you Michael, this is Win-Win for landlords doing unfurnished
- i.e the vast majority.

You get the renewals allowance and it puts the boot in to any competition from furnished lets.

(Personally, this aspect of the budget is cost neutral to my portfolio.)

What can I say, Monty? You have been very quick to judge and accuse me of being misleading, which I don't much appreciate. Let's take a little step back and a deep breath.

For starters, I note that you include in your list a washer dryer. I gather that it is freestanding, am I right? All of my appliances are built in. For the landlord of a furnished property a free-standing washer dryer is relieved under the general 10% wear and tear allowance with no specific relief for the expense, but the replacement of a (usually more expensive) integrated washer dryer would be deductible as a repair (unless an improvement arose in the form of a better model of course) *in addition to* the wear and tear allowance.

I believe the same goes for your 2K flooring repairs. Mine is hardwood flooring fixed under the skirting boards - integrated into the property. So again deductible as a repair *in addition to* the wear and tear allowance. My only carpets are on the stairs.

If I am being handed this allowance on a plate, where is my incentive to actually spend money on replacing furnishings?

As for the extra admin, I don't welcome it but it's not really all that hard. Maybe as a developer I am more used to documenting lots of costs. Every other business has to document their costs and, given that we are all determined to be seen as running businesses, I'm not sure how it can be of benefit to us landlords to be treated differently.

If, as you suggest, a small number of people do commit fraud - and I am sure some will - I'm not sure how the overall result for the taxpayer is any worse than if that same small number of people had been handed a 10% annual allowance for expenses they never had under the old scheme.

I hope that helps make things clearer.

(For the avoidance of doubt, this aspect of the budget alone is going to cost me thousands of ££ a year. I still think the general principle is correct).

What can I say Doc?

I hope that helps make things clearer.

Nope.

We both agree this is a lost cause, it is history.
You profited from it, I broke even.
Well done, there is no animosity on my side.

The general principle for you in London may well be correct but this affects all of the country.
Your general principle is not correct for most of the country.

A cap on W&T would be a fairer solution.

But as we've already agreed, this is a lost cause.

Reply to the comment left by "Monty Bodkin" at "26/07/2015 - 20:06":

"The general principle for you in London may well be correct but this affects all of the country.

Your general principle is not correct for most of the country."

You appear to be slightly hung up on location. London, or indeed any location, does not play a part in my argument. Phil Neville's Manchester flat was being let for £15,000pcm. Under the current system it attracts an allowance of £18,000pa. Quite ridiculous. But just as arbitrary would be a £500/1,000 p.a. cap.

You seem to be arguing that 10% allowance was good because the allowance happened to be about right *in your* letting experience. Even your solution of capping it at £1,000 or £500 is based on suiting *your* particular circumstances.

I'm simply trying to take an objective view. Rather than being good for some, bad for others and about right for a minority in the middle, the new proposal will be correct in most landlord's circumstances in that you will be able to allow for genuine costs incurred. And it is more in line with most other businesses. If it is a lost cause it is because there is no credible argument against it - unlike the proposed treatment of interest.

Although you say things are no clearer I gather you no longer consider my original statement to have been misleading.