TAX RELIEF FOR REPLACING FURNITURE IN LET PROPERTIES
The government announced in the Summer Budget that from April 2016, the current 10% Wear and Tear Allowance for furnished lettings will be replaced with a relief that enables all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings in the property. This will give relief for capital expenditure to a wider range of property businesses.
The proposals are being consulted on during summer 2015 and will give greater consistency and fairness across the residential property letting sector.
The new relief will apply to all landlords of residential dwelling houses, no matter what the level of furnishing. Those operating furnished holiday lettings businesses will continue to claim capital allowances instead of the new replacement basis. If enacted, the new rules will apply from 6 April 2016 for income tax purposes and 1 April 2016 for corporation tax.
The new replacement furniture relief will only apply to the replacement of furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the dwelling house. The initial cost of furnishing a property would not be included.
This will put the old concessionary basis that applied up until 5 April 2013 on a statutory footing, and is welcome news for those letting properties unfurnished and providing white goods, carpets and curtains, where relief had been withdrawn for a three year period. It is also good to see the government responding to lobbying from the accounting profession and letting sector to restore the tax relief. Please contact us if you are potentially affected by these changes.