Wear and tear or repair/maintenance/renewals - or both?
My husband and I own a furnished rental property which we have duly submitted separate tax returns for, claiming 10% wear and tear allowance. After our first or second return (six or seven years ago) we received a message from HMRC reminding us that we couldn't enter figures in the repair/maintenance/renewals box as well as the 10% wear and tear box. We assumed that this was appropriate HMRC advice and subsequently have never entered anything in the repair box, only the 10% wear and tear box, even though we did incur repair/decorating costs. Recently, we have incurred considerable costs to repair the property including roof repairs, necessary bathroom refit (including new bath/shower mixing unit/tiling/painting), new central heating boiler, and full painting and decorating to resolve tenant damage. We have looked through HMRC documents and are still unsure whether we can now fill in the repair/maintenance/renewals box as well as 10% wear and tear box (I find, perhaps mistakenly, their statements in documents contradictory). This situation is compounded by the fact that I solely now rent out another property via an inheritance which has also incurred complete roof replacement costs (during tenancy) and ideally would need to include this in my return in addition to half of initial property costs.
Arthur Weller replies:
A taxpayer is allowed to claim simultaneously both repairs and renewals expenses, and the 10% wear and tear allowance. However, obviously you understand that the 10% wear and tear allowance applies to furniture etc. in a fully furnished property, whereas the repairs and renewals expense claim applies to the building. On the assumption that you have truly under-claimed in previous years, you can make a claim for 'overpayment relief' - see www.hmrc.gov.uk/manuals/sacmanual/SACM12000.htm. However this only entitles you to go back four years. If you can conclusively prove that misleading HMRC guidance caused your mistake - then I would attempt to go back further than four years, but even so I would be sceptical about your chances of success earlier than the four year time limit.
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