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Posted on December 23rd 2015 by admin-movingin

Replacement rules for wear and tear tax allowance are unclear, say tax experts

The replacement rules for the current ‘wear and tear’ tax allowance are still unclear, tax specialists have said.

The new rules, set to kick in next April, will replace the blanket tax allowance with a regime whereby landlords can claim against capital expenditure on specific replacements of furnishings, furniture, appliances, white goods and kitchenware.

But in draft version, the new rules would cap what landlords can claim to the replacement being an equivalent, and not an improvement.

The Association of Taxation Technicians said: “We certainly expect to be seeking guidance on how HMRC will approach the question of whether a new item is substantially the same as the old item which it is replacing.

“If the new item is an improvement, which has to be treated for tax purposes as capital expenditure and not as a like for like replacement to be offset against rental income, the draft provision requires a restriction to the replacement expenditure.

“This position is particularly complicated in relation to items like ‘white goods’ where manufacturers are constantly introducing new technologies and functionality. We will be highlighting to HMRC the situations where we think that practical guidance will be needed to avoid disputed claims.”

However, the Association welcomed some of the new provisions, particularly the fact that landlords will be able to claim against the costs of removal of old items such as fridges and mattresses.