Controversially and without any prior warning HMRC removed the concession that allowed a tax deduction for the replacement of free standing equipment that does not qualify for capital allowances in unfurnished buy to let properties with effect from 6 April 2013.
Previously there was no tax deduction when the asset was originally acquired but a deduction was allowed when the asset was replaced.
The accountancy bodies are lobbying for the reinstatement of this tax relief, but in the meantime landlords should consider letting their properties on a furnished basis in future. Under the rules for furnished lettings the landlord can claim a “wear and tear” allowance of 10% of gross rents as a notional deduction towards the depreciation of furnishings. There is no statutory definition of furnished, however HMRC guidance states: “A furnished property is one that is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc”
An alternative approach, although more expensive, would be to install built in appliances as these would be fixtures and thus be part of the entirety of the property. Thus when replaced, like a bathroom, tax relief would be available as repairs.