Rental Properties and New Kitchens

Q: I recently purchased a buy to let property which is in need of some refurbishment before my new tenants can move in. I have decided to install a new kitchen into the property.  Will I be able to claim tax relief on the cost of this?

Benjamin, Edinburgh

A: You can claim tax relief on this expense, but to decide whether it is relief for Capital Gains Tax purposes, or for Income Tax purposes will depend on how the HM Revenue and Customs classify the expenditure.

The main issue you face here is whether the expenditure you have incurred is defined as “Revenue”, which means it is allowable for tax purposes against the rents you receive from your new tenants, or “Capital”, which means you receive Capital Gains Tax relief when your sell the property.

According to the HM Revenue & Customs guidelines, if the property was not in a state to be let out until the new kitchen was installed it would seem that your new kitchen will be treated as a capital expense.  Also a new kitchen is likely to have increased the value of your property and therefore classed as an improvement.

However, if the property was in a position to be let, or was actually being let when you installed the new kitchen, and the kitchen was just reinstating a worn out or dilapidated asset, you should be able to argue it is a “revenue” expense.

As the rules relating to rental expenditure are broad, and you should always take advice from your local TaxAssist Accountant on property related tax issues.

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Property Accounting Advice from TaxAssist Accountants