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Posted on July 30th 2015 by admin-movingin

Scrapping of wear and tear allowance ‘bad for tenants’

The scrapping of the 10% wear and tear allowance and replacing it with tax relief on replacement furnishings will have an adverse impact on tenants, ARLA has argued.

It says landlords would be less inclined to buy decent furniture and furnishings in the first place, and that rents will rise.

In its formal response to the Government consultation, ARLA says: “It is important to remember that most landlords are not cash rich.

“Most are heavily leveraged 
through buy-to-let mortgage products. As such, with house prices continuing to rise, net rental yields are only around four per cent for most landlords.

“As the current wear and tear allowance is dependent on the amount of rental income received, we expect to see a rise in rents as landlords try to balance their books and recoup the lost revenue brought about by these changes.”

ARLA says the Government has failed to realise the impact of its proposals on tenants, who would have to spend more of their incomes on rent, in turn reducing the amount they could save towards a deposit “and therefore putting the dream of home-ownership further out of reach”.

Elsewhere in its response, ARLA says that the administrative burden on landlords when the new tax regime kicks in next April should not be underestimated.

ARLA says “significant amounts of evidence” will be required to claim the new relief, and guidance will need to be produced to show landlords what they could and could not claim.

The organisation also points out that the current wear and tear allowance is applied to the initial cost of furnishing a property. “By withdrawing this relief, landlords will be faced with a larger financial burden … and may buy cheaper and less durable furniture and furnishings, knowing they will be able to use the allowance to replace poor quality furniture.”

They would also be unlikely to replace basic goods with something better, which the tenant might prefer.