Rental property and allowable costs against tax

Got some figures from relative. Will round them up slightly as dont want to post exact amounts. From e mail received from accountant - Repairs 7950, capitalised allowances 2150 and en_hancement 5800. But this leaves over 16 k that was spent largely doing repair / equivalent replacement missing from tax return. He has gotten figure of 266 under capital allowances in 2019 return so that would make sense for the allocated capital allowances. Any ideas what is going on...all receipts add up to over 32k. Is there any explanation for this ?
 
He went through old emails and found one from the accountant stating there was 18k entered by the handyman under the HRI scheme. Would this have accounted for the missing expenditure ? Where is HRI documented in the tax return? And is that amount then not allowed /excluded from repair costs?
 
Susie2017 said:
Would this have accounted for the missing expenditure ?
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No, the HRI scheme allowed landlords to claim an additional tax credit for repairs, renovations and improvements to a rental property.

I really think you need to figure out what receipts your relative gave his accountant.
 
He gave in several pages of each item purchased by himself right down to curtain hooks! There was also a long detailed invoice from the handyman which gave n an itemized list of work done and costs for each room of the house. He will certainly be looking into this further.
 
Accountant has written back to say ' it is within our power to relook at how we treated aspects of the work I.e repairs vs enhancements that have improved the value of the property' . Asked if review could be left until after 10th December, presumably because he is busy ....
 
Susie2017 said:
it is within our power to relook at how we treated aspects of the work I.e repairs vs enhancements that have improved the value of the property'
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But your problem doesn't seem to be the classification of expenses - it's the fact that €16k isn't accounted for one way or the other, no?

Mind you, I'm struggling to understand why this wasn't picked up at the time.
 
Please forgive my ignorance but one would have thought the Revenue Commissioners would have clarified this in a concice guide giving examples of most scenarios by now.

I recently hired an electrician to replace a shower in a rented property. Can this be written off in one tax year or over 8 tax years or is it considered to be only a write off against CGT.
 
Yes I agree. About 16k is not claimed in any manner it would appear. It's quite unsatisfactory. He took accountants figures for granted at the time but after talking to another landlord with a lot more properties recently realised that something was amiss. Trusted accountant completely that he was doing the right thing.
 
Pmc365 said:
I recently hired an electrician to replace a shower in a rented property. Can this be written off in one tax year or over 8 tax years or is it considered to be only a write off against CGT.
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That sounds like a repair (assuming a like-for-like replacement, allowing for technological advancements) that can be deducted in calculating your taxable profit for the relevant tax year.

To your broader point, there is no detailed Revenue guidance of the type suggested.
 
Accountant replied by e mail to say that when doing the 2018 return he arbitrarily split the expenditure 66:33 as if would be difficult to justify 32k on the property without having enhanced the building. He says he can adjust this now. He states he treated 20k as en_hancement to the building at the time. The rental income for the 2018 was 13 k. But the accountant ended up using s 23 against the rent instead, but surely the rent would have been better off offset against the
expenses of 32k whilst preserving his s 23. Any thoughts.
 
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Susie2017 said:
Accountant replied by e mail to say that when doing the 2018 return he arbitrarily split the expenditure 66:33 as if would be difficult to justify 32k on the property without having enhanced the building. He says he can adjust this now. He states he treated 20k as en_hancement to the building at the time. Any thoughts.
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(Leaving aside the fact that the numbers still don't add up...)

In other words, he just couldn't be bothered (and / or would struggle to get paid for) taking the time and effort to schedule the expenditure and apply some rigour to apportioning it between repairs & renewals, and en_hancement.
 
He gets paid promptly every year for doing the return. This years invoice was settled within 48 hours. The amount of expenditure was 32k. The house had fallen into disrepair and had v little work done on it for 20 years. What would you say to this accountant if you were in this position. Individual had full trust in accountant but has no recollection of agreeing to leave 20k as en_hancement. It was all itemized in detail to him.
 
Seems very lazy and possibly a bit incompetent on the part of the accountant.
 
Will revenue query this on an amended return. There will be little gain for him apart from overpayment of USC. Just restoration of around 20k of s23. He took accountants word for the way it was handled at the time but did feel it was odd not to get more on the repairs when so much had been spent. He is not an accountant so didnt overly question it at the time.
 
Your numbers are still very hard to follow.

Is the split something like this -

Furniture & fittings - €2k (seems low)
Repairs - €8k
Enhancements - €20k

It would obviously be worth going through each expense item, on a line-by-line basis, to see if everything has been appropriately attributed.

However, you may well find that the accountant’s crude allocation is not way off the mark, particularly if the property hadn’t been upgraded for 20 years.
 
There was only 2 k worth of white goods/window blinds.
Expenditure on materials by owner- 13500k, assorted receipts - everything from paint, numerous B+Q receipts, bathroom suites, new electric shower
Bill from handyman - 18 k, included new kitchen, lot of labour e.g painting entire house inside, tidying garden, powerwashing outside, filling skips x2, fitting bathrooms, fitting kitchen, some electrical works, all interior tiling (hall, kitchen, bathrooms x2 etc), fitting attic insulation etc.
Total cost around 32k. Like for like basis, but obviously with some modern embellishments like bathroom cabinets etc.
Should he ring revenue to discuss ? before signing off on new return ?
 
Susie2017 said:
There was only 2 k worth of white goods/window blinds.
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What about the mattresses and light fittings?
Susie2017 said:
Should he ring revenue to discuss ?
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I think he needs to have a discussion with his accountant - or perhaps instruct another accountant.

Fitting attic insulation and filling a skip clearly aren't repairs.

Installing new a kitchen and bathroom suites (to include tiling work) doesn't sound like repairs to me but I'm sure others will disagree.

On the other hand, painting, gardening and powerwashing are clearly repairs/maintenance.

I doubt the handyman broke down the cost for each item of work on his invoice so there is probably an element of judgment as to what proportion relates to repairs and what proportion relates to enhancements.
 
I get that there are grey areas here. I would argue that the bathroom works were repairs. Lot of mould so ceilings needed replacement. Tiles cracked. Grout falling out. Cracked toilets and bath. Defective shower door. Extraction fans not working. This is all like for like and necessary maintenance. Also as someone mentioned mattresses, roller blinds curtains should be included under the capital section but were not. There seems to be a lack of interest by the accountant in delving into the detail as suggested above. Its disappointing. Any point in directly speaking to revenue ?? The owner does not want hassle down the road.
 
Susie2017 said:
I get that there are grey areas here. I would argue that the bathroom works were repairs. Lot of mould so ceilings needed replacement. Tiles cracked. Grout falling out. Cracked toilets and bath. Defective shower door. Extraction fans not working. This is all like for like and necessary maintenance. Also as someone mentioned mattresses, roller blinds curtains should be included under the capital section but were not. There seems to be a lack of interest by the accountant in delving into the detail as suggested above. Its disappointing. Any point in directly speaking to revenue ?? The owner does not want hassle down the road.
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Not really, the system is self assessment so he's entitled to change his return. If he wants to avoid hassle the owner just needs to change accountant, and be prepared to possibly pay a bit more elsewhere to get a better service (although possibly not, as people sometimes unwittingly pay a pretty penny for incompetence).
 
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