# Replacing Boiler in our Rented Property



## HelgaWard (30 Nov 2015)

Hi,
We own and rent out a house. We got the gas boiler serviced at the weekend, and the guy doing the service advised that some part is likely to fail soon, and probably wouldn't be worth replacing. (Boiler is about 18 years old) I was wondering if it possible to deduct the cost of a replacement boiler from tax due? 
I think it is a bit of a grey area. As it it could be seen as a capital investment, but at the same time I won't be replacing with an improved system, zoned heating etc, I will be just replacing the existing (nearly kaputt) gas boiler with a new working version?
Thanks.


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## Bronte (30 Nov 2015)

Boilers would not be capital, they need replacing every decade or so.  So it's a repair and that's what my accountant told me I could put it down as.


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## Gerard123 (30 Nov 2015)

wow, very surprised at that advice.  I would have thought that a boiler replacement is a capital item not a repair.  A repair maintains, a capital item extends.

Do you have that advice in writing to protect yourself?


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## cremeegg (30 Nov 2015)

Despite what many posters think may questions like this do not have a simple black and white answer.  

Revenue defines a number of categories into which an item of expenditure may fall. Under the self assessment system, it is up to you (or your accountant) to decide which category any given item will fall. If Revenue do a tax audit they may accept your decision or challenge it. While many items are clear-cut there is no guarantee in advance that your decision will be acceptable to Revenue.

I would disagree with Bronte above, (a first !) I would see a new boiler as a capital item and claim for it under the wear and tear allowance. It doesn't seem reasonable to me that a new boiler could be classified as a repair. 

But that is just my opinion, however Bronte has just her accountants opinion to go on, which in tax law is worth the same as the opinion of an anonymous poster on AAM i.e. nothing. The taxpayer signs the return, the Revenue accepts or does not, everything is commenting from the sidelines.


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## HelgaWard (30 Nov 2015)

Thanks Bronte, can find discussions where people argue both sides online, would be hoping that your thinking is correct. Maybe I should ring revenue and seek clarification from them?


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## cremeegg (30 Nov 2015)

Gerard123 said:


> wow, very surprised at that advice.  I would have thought that a boiler replacement is a capital item not a repair.  A repair maintains, a capital item extends.
> 
> Do you have that advice in writing to protect yourself?



Having that advice in writing would give no proaction whatsoever from having to pay the tax if the advice turned out to be unacceptable from Revenue. It might give you a claim against your accountant, but probably not.


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## cremeegg (30 Nov 2015)

HelgaWard said:


> Thanks Bronte, can find discussions where people argue both sides online, would be hoping that your thinking is correct. Maybe I should ring revenue and seek clarification from them?



Its called self assessment because you must make the assessment yourself.

While Revenue sometimes do give advice over the phone, and usually worthwhile advice. You cannot rely on that either, its not their responsibility to tell you how to do your tax return.

There is the law, and lots of opinions and you doing a self assessed return.


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## T McGibney (30 Nov 2015)

I don't see anything peculiar about Bronte's opinion. The general rule is that if it's merely a replacement, it's an expense, and if it's an improvement, it's capital.

Boilers tend to be rather functional pieces of equipment and unless your new one has major tangible benefits compared to your old one, it's usually far more likely to be a cost item rather than a capital  expenditure than enhances the value of the property.

(By the way, I wouldn't be 100% sure that a boiler can qualify for wear & tear capital allowances on furniture and fittings, as I would see it as a fixture rather than as a fitting. - but I think the point is rather moot here.)


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## cremeegg (30 Nov 2015)

T McGibney said:


> The general rule is that if it's merely a replacement, it's an expense, and if it's an improvement, it's capital.



This from where ?


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## T McGibney (30 Nov 2015)

From my experience & training. You disagree?


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## cremeegg (30 Nov 2015)

From the Revenue website leaflet IT 70, there are three pots.

1. Expenditure which can be deducted, 2. Wear and tear and 3. Expenditure which cannot be deducted

From pot 1 Expenditure which can be deducted. _"Broadly speaking, deductible expenditure is allowable only to the extent that it:..is not of a capital nature"_

It seems to me that a new boiler is a capital item, anything expected to last 10 years is surely capital. So not there then.

Also from pot 1_"repairs, (a 'repair' means the restoration of an asset by replacing subsidiary parts of the whole asset). Examples of common repairs which are normally deductible in computing rental income include: mending broken windows, doors, furniture and machines"_

Well, mending a machine is not the same as replacing it, now is it, so not there either.

From pot 2 Wear and tear. _"Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc)" _

For my money this is the one, (its fixtures and fittings, not furniture and fittings). I would think a boiler is either a fixture or a fitting.

From pot 3. Expenditure which cannot be deducted. _"Capital expenditure incurred on additions, alterations or improvements to the premises unless allowable under an incentive scheme or incurred on fixtures and fittings"_

Maybe here and it is not deductible from income at all, presumably it would be a CGT deduction.

The reality is that you must inform yourself and make your own decision. In reality I would probably deduct it as a repair and if queried say " it's merely a replacement, it's an expense" and brazen it out.


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## T McGibney (30 Nov 2015)

A previous AAM threat on a very similar question: http://www.askaboutmoney.com/threads/new-windows-repair-or-capital-expenses.162861/


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## cremeegg (30 Nov 2015)

T McGibney said:


> A previous AAM threat on a very similar question: http://www.askaboutmoney.com/threads/new-windows-repair-or-capital-expenses.162861/



The posters on that thread cannot even spell expense 

There was a lot of talk about the UK HMRC and its concept of "replacement" I am not aware of any such concept in Irish Tax, we have deductible expenses, non deductible expenses, and wear and tear, and presumably by implication capital expenditure which does not qualify for a wear and tear allowance.

But I would agree with this.



oldnick said:


> If you feel that  there are good grounds for claiming something as an annual running expence  -rather than capital expenditure, then do so claim.



At the end of the discussion it is what the taxpayer "feels"


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## Gordon Gekko (30 Nov 2015)

My view is that you would claim wear and tear allowances on the new boiler over 8 years.


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## Gerard123 (30 Nov 2015)

cremeegg said:


> Having that advice in writing would give no proaction whatsoever from having to pay the tax if the advice turned out to be unacceptable from Revenue. It might give you a claim against your accountant, but probably not.



Agree it would not stop the Revenue insisting on tax being paid, however it would show some level of diligence and care and attention in preparing the return which might help with preventing interest and/or penalties being applied.  The Revenue may (may not will) take the view that the taxpayer was reasonably diligent and sought professional advice, etc, in preparation.  That's where I am coming from in asking whether there is proof of the advice, what exactly does it say, and how.  (Re claim vs acct - most likely no chance there.)



cremeegg said:


> At the end of the discussion it is what the taxpayer "feels"



Most taxpayers would probably feel like paying reduced, better again, no or virtually no tax.  But that's why tax law is there, there is literature, guidance notes, precedent, experience, etc.  Its not down to how a taxpayer feels.  Come on, that's a ridiculous comment/view in all fairness.


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## T McGibney (30 Nov 2015)

Gordon Gekko said:


> My view is that you would claim wear and tear allowances on the new boiler over 8 years.



But it's obviously not furniture and it's hardly a fitting that can be easily removed from the premises. 

So it wouldn't be eligible for capital allowances?


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## T McGibney (30 Nov 2015)

Gerard123 said:


> Most taxpayers would probably feel like paying reduced, better again, no or virtually no tax.  But that's why tax law is there, there is literature, guidance notes, precedent, experience, etc.  Its not down to how a taxpayer feels.  Come on, that's a ridiculous comment/view in all fairness.



It's not really ridiculous. The rules are somewhat abstract and can be mutually contradictory. It's usually a matter of judgment as to which rule is most applicable in each situation. So it does come down to what the owner or their advisor feels is the best course of action - not to minimise or evade tax (that would be stupid) but to get it right.


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## Gordon Gekko (30 Nov 2015)

T McGibney said:


> But it's obviously not furniture and it's hardly a fitting that can be easily removed from the premises.
> 
> So it wouldn't be eligible for capital allowances?



It's neither furniture nor a fitting. In my view, it's plant/machinery. The existence of the various accelerated capital allowances schemes can also be of assistance. They cover items such as energy efficient boilers. If there are accelerated capital allowances available for certain types of boiler, then logically there should be standard capital allowances available for standard boilers.


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## Sophrosyne (30 Nov 2015)

HelgaWard said:


> Hi,
> We own and rent out a house. We got the gas boiler serviced at the weekend, and the guy doing the service advised that some part is likely to fail soon, and probably wouldn't be worth replacing. (Boiler is about 18 years old) I was wondering if it possible to deduct the cost of a replacement boiler from tax due?
> I think it is a bit of a grey area. As it it could be seen as a capital investment, but at the same time I won't be replacing with an improved system, zoned heating etc, I will be just replacing the existing (nearly kaputt) gas boiler with a new working version?
> Thanks.



I don't think that a new boiler could be classed as a repair.

Revenue defines a "repair" as "the restoration of an asset by replacing subsidiary parts of the whole asset" - IT 70.

If it is simply a like-for-like replacement, then the cost of the boiler should come under the heading "maintenance", i.e. maintaining the property to the standard it was in when it was first let.

You would, however, have to be in a position to prove that it was a like-for-like replacement.


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## Dermot (1 Dec 2015)

Sophrosyne said:


> You would, however, have to be in a position to prove that it was a like-for-like replacement.



Say you are replacing a non functioning boiler aged 10 year + with a new energy efficient boiler this would have to be considered like for like as the older boilers are no longer being manufactured.  I am assuming that logically they would each have similar outputs.


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## Sophrosyne (1 Dec 2015)

Dermot said:


> Say you are replacing a non functioning boiler aged 10 year + with a new energy efficient boiler this would have to be considered like for like as the older boilers are no longer being manufactured.  I am assuming that logically they would each have similar outputs.


 
Yes, I would think so, in particular, if the existing type of boiler was no longer manufactured.

I think that common sense would dictate that if it is the nearest replacement rather than an obvious bells and whistles upgrade, then that should satisfy the "maintenance" test.


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## HelgaWard (1 Dec 2015)

Thanks everyone for your replies.


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## Bronte (1 Dec 2015)

T McGibney said:


> I don't see anything peculiar about Bronte's opinion. The general rule is that if it's merely a replacement, it's an expense, and if it's an improvement, it's capital.
> 
> Boilers tend to be rather functional pieces of equipment and unless your new one has major tangible benefits compared to your old one, it's usually far more likely to be a cost item rather than a capital  expenditure than enhances the value of the property.
> 
> (By the way, I wouldn't be 100% sure that a boiler can qualify for wear & tear capital allowances on furniture and fittings, as I would see it as a fixture rather than as a fitting. - but I think the point is rather moot here.)



Yes that's it Tommy, I think that's what my accountant said to me and there was no question of it going under wear and tear.  In relation to tangible benefits all I know is that boilers are forever needing replacing, fixing, minding, an endless souce of problem they have been in general.


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## Bronte (1 Dec 2015)

HelgaWard said:


> Thanks Bronte, can find discussions where people argue both sides online, would be hoping that your thinking is correct. Maybe I should ring revenue and seek clarification from them?



You can ring today and you'll get a different answer on Friday.  Do it by email but expect to wait weeks for a response.  And even that response mightn't be right. 

You have my accountant and accountant poster Tommy McGibney to go on now.  But as ever be on notice it is you signs the returns, not your accountant.  I'm preparted to discuss and take my accountants advice with his experince and I'm prepared to argue anything with revenue.


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## T McGibney (1 Dec 2015)

Gordon Gekko said:


> It's neither furniture nor a fitting. In my view, it's plant/machinery. The existence of the various accelerated capital allowances schemes can also be of assistance. They cover items such as energy efficient boilers. If there are accelerated capital allowances available for certain types of boiler, then logically there should be standard capital allowances available for standard boilers.



I've never heard of plant & machinery capital allowances being available in respect of a residential property. Am I missing something?


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