HMRC must clarify new wear and tear allowance, say tax experts

Agents acting for landlords replacing furniture and other domestic items in homes to let should be given detailed guidance from the HMRC to avoid future problems.

That is the view of the Association of Taxation Technicians, given in its formal submission to the Treasury on proposals to change wear and tear tax relief for landlords.

The new rules, which will apply from this coming April, permit a tax deduction for the cost of replacement furniture, for example, but the ATT says the draft currently contains many terms which could create confusion. 

“In general, we welcome the new rules which are more logical than those they replace but if they are to work efficiently they need to be much clearer” says Michael Steed, president of the ATT.

In particular the ATT asks:

- will kitchen equipment qualify if it is provided for the general use of, say, three tenants who will live in a property despite the legislation stating “solely for the use of the lessee”?

- do the rules apply at all where the tenants do not have a formal lease?

- will replacement garden furniture qualify given that it is not provided for use “in the dwelling-house”?

- can a futon be a replacement for a bed, or a tumble-drier for a freezer or a bookcase for an old piano?

- if a new item is a real improvement on the old item (because it has much greater functionality) but is purchased second-hand, is the allowable expenditure limited to what would have been the brand new cost of a like-for-like replacement or is it restricted to the hypothetical second-hand cost of a straight replacement? And if the latter, what evidence does the landlord need to keep?