Changes to Wear and Tear allowance in Oxford

Morning all,

All the latest right here for you. Some information relating to the latest on wear and tear which I thought might be of interest to you.

Who is likely to be affected

Companies, individuals and others, such as trusts or collective investment schemes that let residential properties.

General description of the measure

The Wear and Tear Allowance for fully furnished properties will be replaced with a relief that enables all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings, appliances and kitchenware in the property.
The relief given will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced.

Policy objective

The measure will give relief for the cost of replacing furnishings and a fairer way of calculating taxable profits.

Operative date

The measure will have effect for expenditure incurred on or after 1 April 2016 for corporation tax payers and 6 April 2016 for Income Tax payers.

Proposed revisions

Legislation will be introduced in Finance Bill 2016 to repeal the Wear and Tear Allowance provisions and make new provision for a deduction for the replacement of furnishings.
The deduction will be available in calculating the profits of a property business which includes a dwelling-house. The deduction is available for capital expenditure on furniture, furnishings, appliances (including white goods) and kitchenware, where the expenditure is on a replacement item provided for use in the dwelling.

The amount of the deduction is:

• the cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus
• the incidental costs of disposing of the old item or acquiring the replacement less
• any amounts received on disposal of the old item

This deduction will not be available for furnished holiday lettings because capital allowances will continue to be available for them.

Impact on individuals, households and families

This change will create a small additional administrative burden for individual landlords who currently claim the wear and tear allowance as they will now need to keep a record of their actual expenditure and exclude any elements of improvement. This is estimated to be around 750,000 individuals (and households), and the impact on affected individuals (and households) is anticipated to be negligible given that they currently keep records of other expenses such as repair costs.
An estimated 1.4 million individual landlords of unfurnished or part furnished properties will have a new incentive to replace furnishings in their properties, which may lead to improved tenancy conditions.
The measure is not expected to impact on family formation, stability or breakdown.

Monitoring and evaluation

The measure will be monitored through information collected in tax returns.

Further advice

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