Tax Relief on Furniture Fixtures and Fittings For Your Buy to Let

Sep 23, 2021

In a furnished let, wear and tear of domestic items is inevitable. There will come a time when the landlord will need to provide replacements. From a tax perspective, special rules apply to provide relief for the cost of replacement domestic items. The rules only apply to residential lets, not to furnished holiday lettings.

No relief for initial cost

A feature of the relief is that relief is given for the cost of the replacement, not for the initial cost of providing the item.

Conditions

Tax relief for the cost of replacing a domestic item is contingent on the following conditions being met:

  1. The individual or company carries on a property business which includes the letting of at least one dwelling house.
  2. An old domestic item provided for use in the property is replaced by a new domestic item which is provided for the exclusive use of the tenants. The old item is no longer available for their use.
  3. A deduction for the new item would not be prohibited by the wholly and exclusively rule, but a deduction for the cost is denied. This is the case either under the accruals basis because the expenditure is capital not revenue or under the cash basis where the capital expenditure rules prohibit a deduction on the provision, alteration or disposal of a capital item for use in an ordinary residential property.
  4. Capital allowances have not been claimed in respect of the new item.

Conditions 3 and 4 ensure that relief is not given twice for the same expenditure. Relief is only available under the replacement of domestic items rules where relief is not otherwise available.

Domestic items

A domestic item is an item for domestic use. HMRC provide the following illustrative list of items that would be classed as domestic items:

  • moveable furniture such as sofas, tables and bed frames;
  • furnishings such as curtains, carpets and rugs;
  • household appliances such as fridges, freezers and washing machines; and
  • kitchenware such as utensils, crockery and cutlery.

A distinction is drawn between domestic items, which qualify for relief, and fixtures which do not. Fixtures are things like plant that is fixed to the property such that it becomes part of it. For example boilers or water-filled radiators installed as part of a heating system.

Like-for-like replacement

Relief is given, as a deduction in computing the taxable profits of the property income business, for the cost of a like-for-like replacement. In addition, a claim for any costs of disposing of the old item and acquiring the new item (for example, delivery costs) would also be allowable. The deduction claimed must be reduced by any sale proceeds received in respect of the old item.

Where the replacement is superior to the original, the deduction is limited to the cost of a replacement equivalent to the old item. For example, if a fridge is replaced by a fridge-freezer, the landlord would be allowed a deduction for the cost of an equivalent fridge if this is less than the cost of the new item.

Do you need help in understanding what you can and cannot claim? Download our Property Tax Guide here and see the full list of items you can claim against your rental income.

Property income tax guide

 

Related blog posts

Residence nil rate band frozen

Residence nil rate band frozen

With the residence nil rate band being frozen until 2026, if you have a high-value estate in the family it might be worth planning ahead to make sure you reduce the inheritance tax bill. Our latest blog explains more. The residence nil rate band (RNRB) is an...

read more
SDLT and shared ownership

SDLT and shared ownership

Shared ownership can enable an individual to own a stake in a property where they would not otherwise be able to get on the housing ladder. As with other property purchases, stamp duty land tax (SDLT) is payable where you buy a property through shared ownership in...

read more

Got a question for our landlord tax experts?

If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.