Relief for Replacement Domestic Items
As a landlord letting residential property, navigating tax deductions can be a complex endeavour. Fortunately, there’s relief available when it comes to replacing domestic items within your properties. Let’s delve into the details.
What Counts as a ‘Domestic Item’?
Domestic items encompass a wide array of essentials for everyday living, including movable furniture, furnishings, household appliances, and kitchenware. However, it’s crucial to note that fixtures, such as permanently installed items, do not qualify for this relief.
Conditions for Claiming Deductions
To claim a deduction for the replacement of domestic items, certain conditions must be met:
1.      You must be carrying on a property business that includes residential letting.
2.      The old domestic item must be replaced with a new one exclusively for the tenant’s use, and the old item must no longer be available for use.
3.      Expenditure must be incurred solely for business purposes and classified as capital expenditure.
4.      No capital allowances must have been claimed for the new domestic item.
Amount of Deduction
If the new item is a like-for-like replacement, you can deduct its cost. However, if the new item surpasses the old one, the deduction is capped at the equivalent replacement cost. Incidental costs, such as installation and delivery, are also deductible. Yet, if you sell the old item, the deduction must be reduced by the sale proceeds.
Example: Steve’s Scenario
Consider Steve, who replaces a washing machine in his flat with a washer-dryer costing £350, selling the old machine for £30. Additionally, he incurs £100 for delivery and installation. The cost of an equivalent washing machine is £220.
Steve can claim a deduction of £290, comprising the capped cost of the new item (£220), plus delivery and installation costs (£100), minus the proceeds from selling the old machine (£30).
Need Further Guidance?
For tailored advice on optimising your property business’s tax strategy and ensuring compliance with HMRC regulations, don’t hesitate to reach out to Jon Davies Accountants. Our team of experts is here to provide trustworthy guidance and support every step of the way
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