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How do I handle the refurbishment costs I incurred?

Question I recently purchased a property that required refurbishment to make it rentable. Do I add these costs to the purchase price for tax purposes (reducing eventual GCT liability) or deduct from future rental income?

Ian Says:

The cost of refurbishment prior to the first rental is a capital not a revenue expense and is added to the purchase price for CGT purposes. This means that you cannot offset the costs against the rental income received but will instead be able to offset them when you dispose of the property.

Consider the following case study.

Louise buys a run-down property for £70,000. The property is in need to a complete refurbishment before it can be let. She spends £15,000 on the property, and the is able to rent it out.

The £15,000 investment will be added to the purchase price and offset against the selling price.

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