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Is It Possible to Change From Renewal to Wear and Tear Allowance?

Question

We are a company of property managers. We lease apartments from professional landlords and rent them out on a nightly basis to mostly corporate clients. There were large start-up costs four years ago so, despite making money in the last three years, this is the first year that we face a corporation tax bill.

 

In the past we opted for replacement cost for fittings and fixtures: not a conscious decision, more by default as tax was not an immediate issue. Now it is clear that we would benefit from claiming 10% wear and tear allowance instead.

 

How does one best approach HMRC with such a request, given that this is a dispensation not a right, and that it will cost HMRC to grant it?

 

Answer: Have a look at the Property Income Manual on the Revenue website page PIM3200. "Whatever basis is chosen must be followed consistently. It isn’t possible to chop and change between the wear and tear allowance and the renewals allowance from year to year." This implies that it is possible to change, but not 'from year to year'. However, I have had difficulties with Inspectors concerning taxpayers who wanted to change for the first time. I would advise you that the first time you change should be OK, but to make sure you could write to your tax office explaining what you are doing, and the reason why you are making the change.

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