Meg Saksida looks at when repairs in a newly-acquired property can be offset.
When a landlord purchases a home for letting, there may be work that needs to be done on the property before it is let out. Clearly, all the expenditure on the rental property is wholly and exclusively incurred for the business, but the issue is whether the money spent on the work is allowable as a revenue expense or as a capital expense.
Revenue expenses can be offset in the year they are incurred and reduce the associated revenue, thus providing tax benefits immediately. Capital expenses, however, are classified as ‘enhancement expenditure’ and will be offset as part of the capital gains tax calculation on the disposal of the property (as long as they are still inherent in the state of the property). This could be some years from the date of the purchase, so most landlords would prefer the work to be classified as a revenue expense.;