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  • Holiday Lets

    A couple of end of year questions

    We started renting out our annex from April 2018 so I have made a start of the end of year accounts.

    I know that we are able to claim for capital expenses (as well as operating expenses) but what exactly defines a capital expense? I have receipts for things like crockery, cutlery, duvet covers, pillows, towels, pictures, light fittings, blinds and so on. 

    Do these fall under capital expenses or is it just the bigger (more permanent) items like the fitted kitchen, floor coverings, bathroom fixtures etc that count as capital expenses?

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    The smaller items mentioned are broadly setting up costs - so would be offset in due course against CGT rather than Income Tax on the rental profit.

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    Carol,

    I think you are a little confused when you say   'we are able to claim for capital expenses  '        Its Capital you cant reclaim until you sell, I believe (as Landlordy says) that these are all Capital, so not reclaimable. If though, when your tenant moves out and any of those items are missing or stolen and you need to replace them then they would be claimable because they would then be an operating expense. I would recommend you speak to an accountant for a definitive opinion as to whats Capital, what Operating expense & where you might be able to claim depreciation etc.

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson


    Is there a reason why you're not using the rent a room scheme, it includes trading income from annexes to your main residence?

    From PIM4001:

    The scheme applies to income from providing furnished accommodation (or from providing goods and services in connection with that accommodation) in the individual’s only or main residence. This obviously covers income from lodgers. It may also be applied to bed and breakfast or guest house businesses (assessable as trading income)

    https://www.gov.uk/hmrc-internal-manuals...al/pim4001

    From PIM4004:

    Where an individual lets furnished accommodation in a self-contained flat in the individual’s only or main residence he or she is eligible for rent-a-room relief provided:

    • he or she is a qualifying individual (see PIM4001), and
    • the division of the residence into a self-contained unit is only temporary.

    https://www.gov.uk/hmrc-internal-manuals...al/pim4004

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