It’s interesting because it’s a consultation document on changing the rules on tax relief when replacing furnishings and fittings in properties which are let out. In some circumstances the new proposals could be of particular benefit to landlords at the top end of the lettings market.
The current system gives a flat rate ‘wear and tear allowance’ of 10% of rents received in the year and the property has to be fully furnished. Under the current system there is no relief for part furnished properties.
The new proposals, which are scheduled to come in from April 2016, give tax relief on what is actually spent on replacing furnishings and fittings, and is extended to include part furnished properties.
The difference between fully and part furnished is important. Fully furnished properties include items such as sofas, beds, etc, while part furnished properties include only white goods such washing machines, fridges, etc. Under the new proposals landlords of part furnished properties will be able to claim tax relief on the cost of replacing white goods, which they couldn’t do before.
The new proposals are also of particular benefit if a substantial revamp of furnishings is undertaken in a year but also, where expenditure regularly exceeds 10% of rents, notably in high specification finishings. In some cases the new proposals could provide an enduring tax benefit.
The consultation on the changes runs until 9 October 2015, so look out for further announcements.
So, should you play the waiting game? If you are letting a fully furnished property and are considering replacing furnishings and fittings, you may wish to consider whether you should act now, or hold out until after the consultation period to find out what the new proposals will mean for you.
To discuss what the proposals mean or for specialist advice on the taxation aspects of property investment please do contact me.