# Capital Allowance - Rental income



## BAsh

Can anyone tell me how I compute my capital allowance on rental income on Form 11? From the information I can gather I can write down the value of my furniture every year?


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## Pat Bateman

BAsh said:


> Can anyone tell me how I compute my capital allowance on rental income on Form 11? From the information I can gather I can write down the value of my furniture every year?


 
12.5% per year for 8 years (e.g. couch cost €800, therefore claim a deduction of €100 a year for 8 years).


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## BAsh

Thanks for your help


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## doitearis

re pat bateman post; Is this correct - I would have though the amount on which one is claiming is reducing each year so therefore the 12.5% gives a different amount each year?  is this so?  does one fill in the interest ie 12.5 on the form or the amount on which one is applying the 12.5%


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## Kerry Gooner

12.5% of the original cost for each of the first eight years.


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## Pat Bateman

doitearis said:


> re pat bateman post; Is this correct - I would have though the amount on which one is claiming is reducing each year so therefore the 12.5% gives a different amount each year? is this so? does one fill in the interest ie 12.5 on the form or the amount on which one is applying the 12.5%


 
It's 100% correct (i.e. you "though" wrong).


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## doitearis

ok, just learning myself! So do I take it I only fill in the interest amount of form 11?


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## Pat Bateman

doitearis said:


> ok, just learning myself! So do I take it I only fill in the interest amount of form 11?


 
I don't get what you mean by "interest".

Say a landlord purchases a capital item (such as a cooker) for (say) €800.  He's not allowed claim a deduction against the rent for the purchase.  Instead, he claims capital allowances (i.e. tax depreciation) at a rate of 12.5% (i.e. 1/8) over a period of 8 years.  That's a deduction of €100 per year for 8 years.  It'd be reflected on the Form 11 under "capital allowances" as €100.


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## doitearis

thanks, that's what I meant, the calculation (not interest!) I worked out the current value of fixtures and fittings as 18,000 is this excessive?


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## Pat Bateman

doitearis said:


> thanks, that's what I meant, the calculation (not interest!) I worked out the current value of fixtures and fittings as 18,000 is this excessive?


 
How long is a piece of string?

What's the €18,000 made up of?


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## doitearis

kitchen, bathroom, suites, beds, wooden floors, white goods etc


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## Pat Bateman

doitearis said:


> kitchen, bathroom, suites, beds, wooden floors, white goods etc


 
Some of the above items may not qualify for capital allowances.

If they're "enhancement" (for example), you wouldn't get a deduction until you dispose of the property (i.e. against any CGT which may arise).


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## doitearis

What do you mean by "enhancement"? was family home before letting last year.  which items wouldn't qualify?


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## Pat Bateman

doitearis said:


> What do you mean by "enhancement"? was family home before letting last year. which items wouldn't qualify?


 
You should speak with a tax adviser.

I'm happy to give you a high level steer but spoon feeding you on a Sunday evening when you should be paying someone to do so isn't my idea of fun.

Check out Revenue's website (www.revenue.ie)

You should find useful information there.


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## doitearis

thanks for your "high level steer" batemean - I was not asking you in particular and you did choose to answer surely?


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## Padraigb

There is a simple way to sort out what is "enhancement" and what is contents on which you can claim wear & tear: if you sold the house and were clearing it out, you would remove the contents and leave the enhancements.


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## doitearis

seems the whole enhancement issue is open to interpretation......


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## Padraigb

Not a lot. There might be one or two arguable matters on the borderline. 

If you sold a house you are expected to leave fitted kitchens and other fitted furniture behind, also bathroom fittings, and timber flooring.

The argument might be about built-in ovens and the like.


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## myoaktree

I heard you can write off basic items such as toaster/ketttle cups etc on the first year is this correct???


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## badbob

Is it correct that one can claim for central heating system as capital allowances?


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## DB74

I don't think a central heating system could be classified as a fixture or fitting for capital allowance purposes.

It is enhancement expenditure IMO as it adds value to the property on a sale and also it cannot be removed without damaging the property.


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## badbob

are the kitchen and bathroom also considered enhancements?


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## DB74

I would also consider the installation of a new kitchen and a new bathroom as enhancement as they increase the value of the property in question

eg - a new living room suite would not increase the value of a property as it can be removed without changing the property itself


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## Padraigb

DB74 said:


> I don't think a central heating system could be classified as a fixture or fitting for capital allowance purposes.
> 
> It is enhancement expenditure IMO as it adds value to the property on a sale and also it cannot be removed without damaging the property.



I would agree that a CH system is part of the fabric of a property and should not be treated in the same way as a dining suite or a double bed.

But, to my surprise, the Revenue Commissioners say otherwise. See http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3. It mentions among allowable expenses:  "Wear and Tear on furniture and fittings, e.g. carpets, cookers, *central heating* etc." (my emphasis).


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## DB74

I stand corrected _[shakes head in disbelief]_

Sure you could justify near enough everything as F&F if Revenue state that you can claim Capital Allowances on a central heating system


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## T McGibney

Padraigb said:


> I would agree that a CH system is part of the fabric of a property and should not be treated in the same way as a dining suite or a double bed.
> 
> But, to my surprise, the Revenue Commissioners say otherwise. See http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3. It mentions among allowable expenses:  "Wear and Tear on furniture and fittings, e.g. carpets, cookers, *central heating* etc." (my emphasis).



I wouldnt place much emphasis on this. Revenue guides are always subject to 'errors & omissions excepted'-type disclaimers


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## badbob

So T McGibney are you saying central heating, not allowed to be claimed as ca


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## Graham_07

This area is open to some interpretation. Heating systems in industrial buildings may be allowable as part of "plant" and CA claimed. You also have CA on hotels and nursing homes so such "fixture" may come under CA there. 

However generally, apart from the specified industrial and other buildings on which CA can be claimed, fixtures would not normally be allowable. Fixtures can be generally defined as those goods which have become attached to the buildings in such a way that they cannot be removed without substantial damage being caused to the goods themselves or to the building to which they are attached. Heating systems would normally be classed as a fixture. Think, would you take the radiators & boiler with you when moving ???. Examples :-
Floor covering stuck down e.g. tiles.
Immersion heaters
Central Heating Systems
Baths
Electrical wiring including lampholders and fuse boards


Fittings on the other hand, are those goods, which though often attached to buildings, can be removed without substantial damage being caused to the goods or the building.  Examples :-
Blinds
Carpets
Cookers & other appliances 
Fitted carpets & lino other than that stuck down over its entire surface

It is sometimes possible to claim CA for fixtures and class them as "plant" if it has an"active function" in the trade. An example would be a petrol station forecourt canopy. Might seem to be part of the structure or "setting" but the Irish courts have held that it is plant. 

Returning to the central heating, in an ordinary rental property or other normal trading business, I would not consider that heating systems would qualify as plant for CA purposes.


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## Pat Bateman

I agree.  A domestic central heating system should not be eligible for capital allowances.


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## badbob

what about kitchen


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## WindUp

appliances, yes


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## Pat Bateman

WindUp said:


> appliances, yes


 
Agreed.  Appliances, yes and actual kitchen (e.g. cupboards, counters etc), no (i.e. enhancement).


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## kfpg

I have followed this thread through but I don't believe my confusion regarding capital allowances has been answered so here goes if anyone can help.

I bought and lived in a house for about 7 or 8 years. I then moved on to another house but rented out the original property.

Obviously for me to live in the house initially I bought lots of fittings e.g. table and chairs, fridge, oven, beds etc. I simply left most of those items in place when I rented the house.

As far as I know I am allowed to place a value on all those items at the time of the first letting and then depreciate this amount over the next 8 years.

Am I correct? And if so how do I arrive at the value e.g. for an 8 year old washing machine?

Example I bought a washing machine say in 1998 for € 350. What value can I place on it for a Capital allowance in say Jan 2006?


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## DB74

You will have to attempt to value all of these items and then claim 12.5% of this value each year for 8 years.

Basically you have to ask yourself how much is the eg washing machine worth in 2006?

It's going to be very small though if you are realistic about it.


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## kfpg

Do Revenue give any guidelines at all on how to do this.
E.g.1 - The table and chairs is in perfect condition I could argue it has 80% on original value and that it would certainly cost that to replace it.
E.g.2 - I agree an old appliance will have a certain lifespan so maybe they can only be deemed to have 10% or 20% of their original value.

Can I use this kind of logic, unless as I say there are official guidelines.


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## DB74

I'm not aware of any official guidelines so you just have to use your best estimates

Bear in mind that the 12.5% Capital Allowance rate would indicate that Revenue consider that all assets to be effectively worthless after 8 years so arguing that a table & chairs is worth 80% of what you paid for it 10 years ago might not impress a Revenue auditor.


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## twofor1

kfpg said:


> I bought and lived in a house for about 7 or 8 years. I then moved on to another house but rented out the original property.
> 
> Obviously for me to live in the house initially I bought lots of fittings e.g. table and chairs, fridge, oven, beds etc. I simply left most of those items in place when I rented the house.
> 
> As far as I know I am allowed to place a value on all those items at the time of the first letting and then depreciate this amount over the next 8 years.


 
Can anyone confirm that this is definitely allowed in cases like this, given that these expenses were incurred prior to the to the property becoming a rental property.





*What expenses cannot be claimed for?*

Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer's letting fees, advertising fees and legal expenses incurred on first lettings. 
http://www.revenue.ie/en/tax/it/leaflets/it70.html#section5


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## kfpg

I think that furniture and fittings are treated differently to general expenses i.e. as capital allowances which has a different section on the return forms - but I'm not an expert and open to correction


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## Graham_07

twofor1 said:


> Can anyone confirm that this is definitely allowed in cases like this, given that these expenses were incurred prior to the to the property becoming a rental property.
> 
> 
> 
> 
> 
> *What expenses cannot be claimed for?*
> 
> Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer's letting fees, advertising fees and legal expenses incurred on first lettings.
> http://www.revenue.ie/en/tax/it/leaflets/it70.html#section5



What they are getting at here are items such as repairs or other similar costs AND interest on loans/mortgages prior to the first letting. Capital expenditure ( fridge/cooker) is not the same as ordinary revenue related expenditure ( paint, replacement lightbulbs) .  If someone is going to let a house, furnished then obviously they have to purchase and fit the house out before the letting. Furniture & equipment purchased before the letting and then put in use for that letting are allowed at 12.5% straight line for 8 years as mentioned earlier in the thread.


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## recoupca

*Capital Allowances*

Central Heating forms part of the Fixtures and Fittings as far as capital allowances go if you're claiming for the building itself.

In relation to the question about calculation, search Google for "property capital allowance indicative savings'


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## BazFitz

recoupca said:


> Central Heating forms part of the Fixtures and Fittings as far as capital allowances go if you're claiming for the building itself.
> 
> In relation to the question about calculation, search Google for "property capital allowance indicative savings'


 
Exactly.  The question is "can you take it with you?".  Clearly, in relation to a central heating system that's not likely.  So with a trade, you're in IBA territory.  In a rental income scenario, I'd treat it as enhancement for CGT purposes to be included when the property is disposed of.


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## TillyT

In relation to capital allowances - can you hold back a percentage of your capital allowances for the following year?


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## simplyjoe

badbob said:


> Is it correct that one can claim for central heating system as capital allowances?


 
Yes


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## DB74

badbob said:


> Is it correct that one can claim for central heating system as capital allowances?


 
No


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## recoupca

*Holding back allowances*



TillyT said:


> In relation to capital allowances - can you hold back a percentage of your capital allowances for the following year?



Yes.

In fact, if you made a profit (and therefore paid tax) for the last couple of years, you can normally claim this back straight away.

You can then spread the remaining benefit over the next 3 or 4 years.

If you haven't made a profit this year, you can carry across the whole entitlement.

In fact, if you're property company didn't make a profit, you can carry the benefit sideways in to other commercial interests that did.

Andy
andy@recoupcapitalallowances.co.uk


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## recoupca

DB74 said:


> No



Yes. Quite a valuable one.

andy@recoupcapitalallowances.co.uk


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## DB74

Andy - are you aware that this is an Irish forum?

I note from your e-mail address that you are probably based in UK


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## DB74

recoupca said:


> In fact, if you're property company didn't make a profit, you can carry the benefit sideways in to other commercial interests that did.


 
Whilst I appreciate that the legislation is possibly a bit ambiguous in this area, it is Revenue's opinion that rental cap alls are ringfenced purely for use against rental income so unless you want to take Revenue to court I would advise against attempting to offset rental cap alls against other income


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## simplyjoe

DB74 said:


> No


 
DB why do you say no when it was quoted to you on a seperate thread that they were claimable.

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3


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## DB74

Despite the Revenue leaflet, IMO a central heating system enhances the value of the property and therefore cannot be used to claim W&T. The expenditure incurred in putting in the system can be used to reduce any CGT on the sale of the property.

You will also find that most posters on this thread agree with my interpretation


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## simplyjoe

So the Revenue are wrong and you and your fellow posters are right?


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## DB74

simplyjoe said:


> So the Revenue are wrong and you and your fellow posters are right?


 
There's no right or wrong as such. With issues like this it's all a matter of interpretation and IMO a central heating system is NOT claimable for Cap Alls as it adds value to a property

In fairness, if a dispute arose with Revenue over it I think it is unlikely that a Revenue Inspector could levy interest or penalties on somebody who claimed Capital Allowances on a central heating system given what is stated in the Revenue leaflet. I do however think that most Revenue Inspectors would consider a central heating system an enhancement as opposed to a fixture or fitting.


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## BazFitz

DB74 said:


> There's no right or wrong as such. With issues like this it's all a matter of interpretation and IMO a central heating system is NOT claimable for Cap Alls as it adds value to a property
> 
> In fairness, if a dispute arose with Revenue over it I think it is unlikely that a Revenue Inspector could levy interest or penalties on somebody who claimed Capital Allowances on a central heating system given what is stated in the Revenue leaflet. I do however think that most Revenue Inspectors would consider a central heating system an enhancement as opposed to a fixture or fitting.


 
+1

Revenue leaflets have no legislative basis.  However, Revenue would struggle to contradict their own stated position.

It would depend on the nature of the central heating system and its level of integration.  My own view is that the installation of a central heating system should generally be "enhancement" and therefore be in CGT or IBA territory.

If it's grey, you'd look at which result is more beneficial to the client and run with that.


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## WindUp

db74 said:


> there's no right or wrong as such. With issues like this it's all a matter of interpretation and imo a central heating system is not claimable for cap alls as it adds value to a property
> 
> in fairness, if a dispute arose with revenue over it i think it is unlikely that a revenue inspector could levy interest or penalties on somebody who claimed capital allowances on a central heating system given what is stated in the revenue leaflet. I do however think that most revenue inspectors would consider a central heating system an enhancement as opposed to a fixture or fitting.



+1


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## gearoidc

If I had to replace a €400 washing machine after only 3 years...how do I deal with that? Do I have to suffer the loss? 
Is this not effectively a repair???

Advice would be much appreciated


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## DB74

You get what's called a Balancing Allowance which is the difference between what you got for it and the Tax Written Down Value as at date of disposal

eg - Washing Machine bought 3 years ago @ €300

Wear & Tear in Year 1 = €300 x 12.5% = €37.50
Wear & Tear in Year 2 = €300 x 12.5% = €37.50
Wear & Tear in Year 3 = €300 x 12.5% = €37.50

Disposed in Year 4 - Proceeds of NIL
TWDV at date of disposal = €300 - €112.50 (€37.50 x 3) = €187.50

Therefore Balancing Allowance = €187.50

This figure is added to your capital allowances for Year 4, therby giving you tax relief on the loss.

You can also claim capital allowance on the replaced washing machine in Year 4, obviously at 12.5% of the cost over 8 years


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## gearoidc

The Revenue guidelines as set out are so insufficient it's an insult. (Check out the British system ...so so much simpler and clearcut)

www hmrc.gov.uk/manuals/pimmanual/pim3200.htm

 Bad enough to be screwed the way we are being the last few years without having to tiptoe through their lazy, inadequate rulebook.
I installed double glazing last year. Am I to understand from some posters above that this can only be claimed against CGT?


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## gearoidc

Just spotted this. Thanks very much DB!

I'm so .....ing frustrated with this process. People like you are a godsend. Thanks again


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## WindUp

gearoidc said:


> The Revenue guidelines as set out are so insufficient it's an insult. (Check out the British system ...so so much simpler and clearcut)
> 
> www hmrc.gov.uk/manuals/pimmanual/pim3200.htm
> 
> Bad enough to be screwed the way we are being the last few years without having to tiptoe through their lazy, inadequate rulebook.
> I installed double glazing last year. Am I to understand from some posters above that this can only be claimed against CGT?



as it enhances the value of the premises, i wouldnt claim capital allowances on it


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## gearoidc

Thanks for that.
Can I ask your view on new kitchen and tiling. Same story?


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## WindUp

gearoidc said:


> Thanks for that.
> Can I ask your view on new kitchen and tiling. Same story?



fraid so---apart from appliances--- i would always claim allowances on anything i can take away with me


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## Black Sheep

Sorry to butt in here.
I need to *replace  *most of the existing heating system, rads. pipes etc.(boiler is OK).  Floors have to come up  and be replaced to do the job. Does this come under capital allowances. I can't see any enhancement here


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## BazFitz

In my view, you should include this expenditure as "enhancement" for CGT purposes.  You'd include it with (say) the base cost of the property and any incidental costs of acquisition and disposal when calculating any gain or loss.


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## iarann

Ok I follow the general line taken here that capital expenditure is not deductable.

But if you look at w ww.revenue.ie/en/tax/it/leaflets/it70.html#Section6 it talks about "Relief for refurbishment of certain rented accommodation" and capital expenditure that is allowable. Unfortunitially it does not give any guidelines.

Can this be read to cover building refurbishment such as upgrading Heating Systems, Insulating (after deducting any monies received from SEI), installing double glazing, substantial house repairs/upgrade eg fitting a downstairs toilet?


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## WindUp

iarann said:


> Ok I follow the general line taken here that capital expenditure is not deductable.
> 
> But if you look at w ww.revenue.ie/en/tax/it/leaflets/it70.html#Section6 it talks about "Relief for refurbishment of certain rented accommodation" and capital expenditure that is allowable. Unfortunitially it does not give any guidelines.
> 
> Can this be read to cover building refurbishment such as upgrading Heating Systems, Insulating (after deducting any monies received from SEI), installing double glazing, substantial house repairs/upgrade eg fitting a downstairs toilet?



i think this was to end in 2008---open to correction though


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## Bazzer01

I've been having problems with the whole Cap Allowances piece on the ROS F11 form ... can't really understand the way it's doing it's calculations! Two questions ... 

Has anyone ever come across any 'bug's' or 'file corruption' type issues with the ROS F11 form ? 
If I am sure that I am filling in the form correctly , and have records to back this up , what are the chances that I will ever be subjected to an audit / inspection from the Revenue (I am a PAYE taxpayer with some rental income ... I used to use an acounting service to do my returns , but for the last couple of years I've done my own to save a few quid)


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## gearoidc

I stumbled on these today.

I found this on the actual UK Revenue site-




 "Problems can arise with old assets over where is the dividing line between a repair and an improvement. 

The fact that the method chosen is the cheapest and most effective is  neutral. It does not deprive expenditure of its capital character.  Replacing an object may be cheaper and better than patching and mending.  

A repair or replacement of a part of the asset using modern materials  may look like an improvement because of the greater durability, superior  qualities, etc of the new material. If the new materials are broadly  equivalent to the old materials then the cost is normally an allowable  expense.

*EXAMPLE:
Kate has the windows of her offices replaced. The old windows were  singled glazed. She just wants to replace the old units. Building  standards have improved and the types of replacement windows available  from retailers have changed. The replacement windows are double-glazed.  This shows the effect of changes in technology. At one time replacing  single-glazed windows with double-glazed windows was regarded as an  improvement and therefore capital expenditure. But times have changed.  Double-glazing is now standard and is the modern equivalent. Replacing single-glazed windows by double-glazed equivalents counts as allowable expenditure on repairs*."

And this is from a UK legal/tax advisory website.

*[broken link removed]
*



*"1. Look to claim costs as 'revenue' costs*

If you can  claim large costs as 'revenue' costs rather than 'capital' costs, then  you can reduce your annual property income tax bill in a big way.
Sometimes  it's easy to determine whether a cost is of a capital nature or not.  For example, if you have had a new conservatory built, or even a new  bedroom added, then this is clearly a capital expense. This is because  it has increased the value of the property.
But sometimes distinguishing between the two costs isn't so clear.
Consider  the replacement of windows. *If you currently have rotten single glazed  windows, then you will be able to replace them with UPVC double glazed  windows and offset the entire cost against the rental income*. *There will  be no need to class this as a 'capital cost'.*
*This is because  it's generally accepted that standard windows used in modern properties  are UPVC and not wooden single glazed windows, so you're replacing the  current standard window fitting with a like-for-like window.*
Remember  that if you can class a cost as a 'revenue' cost, it will improve your  cash flow as you will pay less property income tax."

What do you think?
Seems like a reasonable enough argument to me.
(although I would say that, wouldn't I?)


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