Hi,

I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
decucted. (I am not in Rent a Room Scheme)

Allowable Expenses
http://tinyurl.com/32ytqb

I was wondering if replacing an aging TV in the communal lounge is
acceptable. Is that 'maintenance and repair'?

Or is this something that comes under the 'wear and tear' or
'renewals' allownace?
Which of these two methods would yield a larger reduction? New TV
£1,500, old TV not sold.
I'm interested in getting this right as the advice reads 'Once you've
chosen which of these allowances to claim for a property, you can't
switch between them from year to year.'

Which makes it sound like I can never change my mind?


In addition if I were to buy another house and rent out all room in
that house, are my expenses 100% deductible?
And can (must?) I add income and expenses from my own home and the new
house together or are they strictly separate? I think they are to be
pooled together.

Thanks for any help or pointers.

zeebop.

zeebop wrote:

> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
> decucted. (I am not in Rent a Room Scheme)

Do you mean you've already decided you don't want to be in the
rent-a-room scheme, or that the rental income is more than the
limit?

> I was wondering if replacing an aging TV in the communal lounge is
> acceptable. Is that 'maintenance and repair'?

Yes, it is, but only if the replacement is equivalent.  Suppose the
old one is an ordinary one, of which a straight replacement might
cost £300, but you replace it with a whizzo huge flat plasma screen
model costing £1500, then only £300 of the £1500 could be treated as
"repair" and set as an expense against income, while the remaining
£1200 would have to go on the capital account.

Only if the old one is also a whizzo huge flat plasma screen model,
could the entire £1500 be counted a "repair".

> Or is this something that comes under the 'wear and tear' or
> 'renewals' allownace?

Yes, it is.  The TV is "contents".

> Which of these two methods would yield a larger reduction? New TV
> £1,500, old TV not sold.

Do not base the decision on one item.  Take a long term view.
If your rental income is (say) £6000 a year, the wear and tear
allowance means you are treated as if you were spending £600 a
year on repairs and renewals of contents (even if you aren't).
So if *on average* you expect to be spending more than £600 a
year on repairs and renewals of contents, then you would be
better off avoiding the WTA method and using actual costs
instead.  If less, obviously WTA is better.

> I'm interested in getting this right as the advice reads 'Once you've
> chosen which of these allowances to claim for a property, you can't
> switch between them from year to year.'
> 
> Which makes it sound like I can never change my mind?

That is correct, you cannot change your mind.  But if your rental
business involves several properties, it's OK to use wear-and-tear
basis for some properties and actual repair/replacement basis for others.

If you withdraw a property from your rental business and later
re-introduce it, then you can use a different basis.  So in a limited
way you *can* change your mind.  In the case of your home, you would
have to stop renting out rooms altogether for a bit before starting
up again.

> In addition if I were to buy another house and rent out all room in
> that house, are my expenses 100% deductible?

Yes, all expenses relating to *that* house would be deductible,
except to the extent that they relate to contents repairs/renewals
if you are operating WTA basis for that house.

> And can (must?) I add income and expenses from my own home and the new
> house together or are they strictly separate? I think they are to be
> pooled together.

They are pooled together in the sense that you only have one rental
business no matter how many properties it involves.  But because you
can decide on a house-by-house basis whether to go for WTA or actual
repair/renewals, you in effect have two sub-pools.

Ronald Raygun wrote:

> Yes, it is, but only if the replacement is equivalent.  Suppose the
> old one is an ordinary one, of which a straight replacement might
> cost £300, but you replace it with a whizzo huge flat plasma screen
> model costing £1500, then only £300 of the £1500 could be treated as
> "repair" and set as an expense against income, while the remaining
> £1200 would have to go on the capital account.
> 
> Only if the old one is also a whizzo huge flat plasma screen model,
> could the entire £1500 be counted a "repair".

I don't think any of it is a repair.  You have disposed of the old TV with
nil proceeds, and replaced it with a new one.

Jonathan Bryce wrote:

> Ronald Raygun wrote:
> 
>> Yes, it is, but only if the replacement is equivalent.  Suppose the
>> old one is an ordinary one, of which a straight replacement might
>> cost £300, but you replace it with a whizzo huge flat plasma screen
>> model costing £1500, then only £300 of the £1500 could be treated as
>> "repair" and set as an expense against income, while the remaining
>> £1200 would have to go on the capital account.
>> 
>> Only if the old one is also a whizzo huge flat plasma screen model,
>> could the entire £1500 be counted a "repair".
> 
> I don't think any of it is a repair.  You have disposed of the old TV with
> nil proceeds, and replaced it with a new one.

Indeed, so it is a renewal.  In a normal business this would be dealt
with under the capital allowances regime, but in a rental business you
don't get capital allowances, and instead renewals -like repairs- are
counted as direct expenses.  But they have to be reasonably like for like
and if there is an element of betterment (of specification) involved,
then I don't think it completely invalidates the renewals element, but
there is a split, with the "upgrade" element treated as a totally new
acquisition (which therefore goes on the capital account) but what it
would have cost to replace with an equivalent still allowable as an
expense.

I'm not sure what would happen in a downgrade situation, though.
Say you were replacing a (broken beyond repair) widescreen plasma TV
(which would cost £1500 to replace) with an ordinary £300 telly.  Could
you charge £1500 to repairs/renewals and £-1200 to capital?  :-)

On Sat, 07 Jun 2008 22:21:52 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>Jonathan Bryce wrote:
>
>> Ronald Raygun wrote:
>> 
>>> Yes, it is, but only if the replacement is equivalent.  Suppose the
>>> old one is an ordinary one, of which a straight replacement might
>>> cost £300, but you replace it with a whizzo huge flat plasma screen
>>> model costing £1500, then only £300 of the £1500 could be treated as
>>> "repair" and set as an expense against income, while the remaining
>>> £1200 would have to go on the capital account.
>>> 
>>> Only if the old one is also a whizzo huge flat plasma screen model,
>>> could the entire £1500 be counted a "repair".
>> 
>> I don't think any of it is a repair.  You have disposed of the old TV with
>> nil proceeds, and replaced it with a new one.
>
>Indeed, so it is a renewal.  In a normal business this would be dealt
>with under the capital allowances regime, but in a rental business you
>don't get capital allowances, and instead renewals -like repairs- are
>counted as direct expenses.  But they have to be reasonably like for like
>and if there is an element of betterment (of specification) involved,
>then I don't think it completely invalidates the renewals element, but
>there is a split, with the "upgrade" element treated as a totally new
>acquisition (which therefore goes on the capital account) but what it
>would have cost to replace with an equivalent still allowable as an
>expense.
>
>I'm not sure what would happen in a downgrade situation, though.
>Say you were replacing a (broken beyond repair) widescreen plasma TV
>(which would cost £1500 to replace) with an ordinary £300 telly.  Could
>you charge £1500 to repairs/renewals and £-1200 to capital?  :-)


Thank-you both for your input.
The old TV was £1,500 new (32" CRT). Now worth (£200 - £300).
The new TV is 46" Plasma. 

From what you say it is not a repair, and hence can only be deducted
through the capital cost route.

I am still unsure which route to go for my own home. I receive in the
region of £8.5k pa rental income. This year I will spend approx the
following - the difficulty is for me to work out if it will be deemed
a repair or improvement.

TV - £1,500
(Old one works)

Kitchen Renovation - £500
To make the layout more practical

Kitchen Flooring - £1,000
Old Flooring 15 years old, usuable but worn

Fridge Freezer - £700
Old F/Freezer 15 years old, usuable but in worn condition

Dishwasher - £1,000
Old D/Washer 15 years old and erratic

Decoarating (Communal Areas)
£2,000 - to refresh 15 year old decorations

Obviously my mortgage interest, utility bills, maintenance charges
will remain under the allowable expense section.

I anticipate to spend only around £2,000 in future years in terms of
items that would fall squarely into capital allowances. Although my
standard allowable expenses would be in the £8k region.

On Sat, 07 Jun 2008 21:20:53 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>> decucted. (I am not in Rent a Room Scheme)
>
>Do you mean you've already decided you don't want to be in the
>rent-a-room scheme, or that the rental income is more than the
>limit?

I've decided I dont want to be in the Rent-A-Room scheme. My income is
around £8.5k. My allowable expenses (mortgage interest, utility bills,
service charges etc..) will be very close to this region as well.


>
>> I was wondering if replacing an aging TV in the communal lounge is
>> acceptable. Is that 'maintenance and repair'?
>
>Yes, it is, but only if the replacement is equivalent.  Suppose the
>old one is an ordinary one, of which a straight replacement might
>cost £300, but you replace it with a whizzo huge flat plasma screen
>model costing £1500, then only £300 of the £1500 could be treated as
>"repair" and set as an expense against income, while the remaining
>£1200 would have to go on the capital account.
>
>Only if the old one is also a whizzo huge flat plasma screen model,
>could the entire £1500 be counted a "repair".


Not sure how to define equivalent. They both cost the same new,
£1,500. How do you mean the remaining £1,200 would have to 'go on the
capital account' Sorry for my ignorance, but how/what is the capital
account treated in terms of calculating my taxable liability.

It is the second point I am unsure of:

    * the amount you sold the old one for (if you got anything for it)
    * anything extra you paid for a better one

So new TV (£1,500) minus amount for old TV (£0), minus anything extra
I paid for a better one - I guess this is the £1,200 (given I could
buy my old one 2nd hand for £300). All very 'finger in the air' maths
this....
So the deductable amount is £300?




>
>> Or is this something that comes under the 'wear and tear' or
>> 'renewals' allownace?
>
>Yes, it is.  The TV is "contents".

Ok, I see, it looks like most appliance replacements will fall under
this. Not sure where the official HM Revenue price list is though for
me to work out how much a direct replacement for my 15 year old
Zanussi F/Freezer is though.......

>
>> Which of these two methods would yield a larger reduction? New TV
>> £1,500, old TV not sold.
>
>Do not base the decision on one item.  Take a long term view.
>If your rental income is (say) £6000 a year, the wear and tear
>allowance means you are treated as if you were spending £600 a
>year on repairs and renewals of contents (even if you aren't).
>So if *on average* you expect to be spending more than £600 a
>year on repairs and renewals of contents, then you would be
>better off avoiding the WTA method and using actual costs
>instead.  If less, obviously WTA is better.

That sounds like good advice. I would say typically my rental income
is £8.5k
Although not sure about the section that says *less any costs you pay
that a tenant would usually pay* - what costs are those?

*The allowance is 10 per cent of the 'net rent' - this being the rent
received less any costs you pay that a tenant would usually pay.*

Anyway, assuming the outcome is £850 a year, I would say that is a
little above my expected yearly expenditure on capital items - except
this year when it will be around £4k - £5k.


>
>> I'm interested in getting this right as the advice reads 'Once you've
>> chosen which of these allowances to claim for a property, you can't
>> switch between them from year to year.'
>> 
>> Which makes it sound like I can never change my mind?
>
>That is correct, you cannot change your mind.  But if your rental
>business involves several properties, it's OK to use wear-and-tear
>basis for some properties and actual repair/replacement basis for others.

That sounds good then, I think the 10% route would probably be the
best bet long term. Maybe this is most popular with most people?

>
>If you withdraw a property from your rental business and later
>re-introduce it, then you can use a different basis.  So in a limited
>way you *can* change your mind.  In the case of your home, you would
>have to stop renting out rooms altogether for a bit before starting
>up again.
>
>> In addition if I were to buy another house and rent out all room in
>> that house, are my expenses 100% deductible?
>
>Yes, all expenses relating to *that* house would be deductible,
>except to the extent that they relate to contents repairs/renewals
>if you are operating WTA basis for that house.

I thought repairs were 100% deductible, it was the
replacements/renewals that werent?

>
>> And can (must?) I add income and expenses from my own home and the new
>> house together or are they strictly separate? I think they are to be
>> pooled together.
>
>They are pooled together in the sense that you only have one rental
>business no matter how many properties it involves.  But because you
>can decide on a house-by-house basis whether to go for WTA or actual
>repair/renewals, you in effect have two sub-pools.

I see, so the income is one big pool, but I calculate the WTA or
renewals on a per property basis. My main concern was to make sure I
could include any losses from one property and include that in the
total.

Again, thanks very much for your help, it is much clearer in my mind
now.

On 7 Jun, 21:19, zeebop <y...@um.right> wrote:
> Hi,
>
> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
> decucted. (I am not in Rent a Room Scheme)
>
Are you sure this is correct?

You rent 2 rooms out of 3 but there is a communal lounge. Who uses the
lounge? Is the longe one of the 2 rooms? Where do you live?

"zeebop" wrote
> Not sure how to define equivalent...
...
"zeebop" wrote
> The old TV was ... 32" CRT ...
> The new TV is 46" Plasma.

Hehe.  Do you really think those are equivalent?

PeterSaxton wrote:

> On 7 Jun, 21:19, zeebop <y...@um.right> wrote:
>> Hi,
>>
>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>> decucted. (I am not in Rent a Room Scheme)
>>
> Are you sure this is correct?
> 
> You rent 2 rooms out of 3 but there is a communal lounge. Who uses the
> lounge? Is the longe one of the 2 rooms? Where do you live?

I assume he means there are 3 bedrooms, and that he lives in one of
them and rents out the other two.  The whole rest of the house is
communal.

On Sun, 08 Jun 2008 02:43:45 +0100, zeebop <yeah@um.right> wrote:

>On Sat, 07 Jun 2008 22:21:52 GMT, Ronald Raygun
><no.spam@localhost.localdomain> wrote:
>
>>Jonathan Bryce wrote:
>>
>>> Ronald Raygun wrote:
>>> 
>>>> Yes, it is, but only if the replacement is equivalent.  Suppose the
>>>> old one is an ordinary one, of which a straight replacement might
>>>> cost £300, but you replace it with a whizzo huge flat plasma screen
>>>> model costing £1500, then only £300 of the £1500 could be treated as
>>>> "repair" and set as an expense against income, while the remaining
>>>> £1200 would have to go on the capital account.
>>>> 
>>>> Only if the old one is also a whizzo huge flat plasma screen model,
>>>> could the entire £1500 be counted a "repair".
>>> 
>>> I don't think any of it is a repair.  You have disposed of the old TV with
>>> nil proceeds, and replaced it with a new one.
>>
>>Indeed, so it is a renewal.  In a normal business this would be dealt
>>with under the capital allowances regime, but in a rental business you
>>don't get capital allowances, and instead renewals -like repairs- are
>>counted as direct expenses.  But they have to be reasonably like for like
>>and if there is an element of betterment (of specification) involved,
>>then I don't think it completely invalidates the renewals element, but
>>there is a split, with the "upgrade" element treated as a totally new
>>acquisition (which therefore goes on the capital account) but what it
>>would have cost to replace with an equivalent still allowable as an
>>expense.
>>
>>I'm not sure what would happen in a downgrade situation, though.
>>Say you were replacing a (broken beyond repair) widescreen plasma TV
>>(which would cost £1500 to replace) with an ordinary £300 telly.  Could
>>you charge £1500 to repairs/renewals and £-1200 to capital?  :-)
>
>
>Thank-you both for your input.
>The old TV was £1,500 new (32" CRT). Now worth (£200 - £300).
>The new TV is 46" Plasma. 
>
>From what you say it is not a repair, and hence can only be deducted
>through the capital cost route.
>
>I am still unsure which route to go for my own home. I receive in the
>region of £8.5k pa rental income. This year I will spend approx the
>following - the difficulty is for me to work out if it will be deemed
>a repair or improvement.
>
>TV - £1,500
>(Old one works)
>
>Kitchen Renovation - £500
>To make the layout more practical
>
>Kitchen Flooring - £1,000
>Old Flooring 15 years old, usuable but worn
>
>Fridge Freezer - £700
>Old F/Freezer 15 years old, usuable but in worn condition
>
>Dishwasher - £1,000
>Old D/Washer 15 years old and erratic
>
>Decoarating (Communal Areas)
>£2,000 - to refresh 15 year old decorations
>
>Obviously my mortgage interest, utility bills, maintenance charges
>will remain under the allowable expense section.
>
>I anticipate to spend only around £2,000 in future years in terms of
>items that would fall squarely into capital allowances. Although my
>standard allowable expenses would be in the £8k region.

Surely as it is the TV in his own home there is a problem with Wholly
and exclusively here.  The TV is as much for him as for his rental
business

--
Alan "Ferrit" Ferris

 ()'.'.'()
 ( (T) )
 ( ) . ( )
 (")_(")

On Sun, 08 Jun 2008 03:08:23 +0100, zeebop <yeah@um.right> wrote:

>On Sat, 07 Jun 2008 21:20:53 GMT, Ronald Raygun
><no.spam@localhost.localdomain> wrote:
>
>>zeebop wrote:
>>
>>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>>> decucted. (I am not in Rent a Room Scheme)
>>
>>Do you mean you've already decided you don't want to be in the
>>rent-a-room scheme, or that the rental income is more than the
>>limit?
>
>I've decided I dont want to be in the Rent-A-Room scheme. My income is
>around £8.5k. My allowable expenses (mortgage interest, utility bills,
>service charges etc..) will be very close to this region as well.

You do realise by claiming Mortgage interest you affect the Capital
Gain when you come to sell it as you cannot claim PPR on the whole of
the gain when you sell it. 

--
Alan "Ferrit" Ferris

 ()'.'.'()
 ( (T) )
 ( ) . ( )
 (")_(")

zeebop wrote:

> On Sat, 07 Jun 2008 21:20:53 GMT, Ronald Raygun
> <no.spam@localhost.localdomain> wrote:
>>zeebop wrote:
>>
>>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>>> decucted. (I am not in Rent a Room Scheme)
>>
>>Do you mean you've already decided you don't want to be in the
>>rent-a-room scheme, or that the rental income is more than the
>>limit?
> 
> I've decided I dont want to be in the Rent-A-Room scheme. My income is
> around £8.5k.

That's above the limit anyway, so it's just as well you don't want
to be in it, because you can't be.

>>> I was wondering if replacing an aging TV in the communal lounge is
>>> acceptable. Is that 'maintenance and repair'?
>>
>>Yes, it is, but only if the replacement is equivalent.  Suppose the
>>old one is an ordinary one, of which a straight replacement might
>>cost £300, but you replace it with a whizzo huge flat plasma screen
>>model costing £1500, then only £300 of the £1500 could be treated as
>>"repair" and set as an expense against income, while the remaining
>>£1200 would have to go on the capital account.
>>
>>Only if the old one is also a whizzo huge flat plasma screen model,
>>could the entire £1500 be counted a "repair".
> 
> Not sure how to define equivalent. They both cost the same new,
> £1,500. How do you mean the remaining £1,200 would have to 'go on the
> capital account' Sorry for my ignorance, but how/what is the capital
> account treated in terms of calculating my taxable liability.

In any business there are two kinds of expenditure, namely one-off
and recurring.  Likewise with income.  You can set recurrent expenses
against recurrent income for income tax purposes.  You can set one-off
expenses agaist one-off income for capital gains tax purposes.  But
you can't generally mix them.

Suppose you were to buy a flat to rent out.  The cost of buying it and
of furnishing it cannot be set against rental income, only against the
proceeds when you eventually sell the place.  This is the capital account.

> It is the second point I am unsure of:
> 
>     * the amount you sold the old one for (if you got anything for it)
>     * anything extra you paid for a better one
> 
> So new TV (£1,500) minus amount for old TV (£0), minus anything extra
> I paid for a better one - I guess this is the £1,200 (given I could
> buy my old one 2nd hand for £300). All very 'finger in the air' maths
> this....
> So the deductable amount is £300?

My mind boggles at how much people spend on bloody tellies these days.
In my example I assumed £300 would be the *new* cost of an ordinary
telly, having assumed that the old one was also "ordinary".  You hadn't
said before what the old one was, but now it seems it too was fancy,
but not quite as fancy as what you're proposing to replace it with.

Forget the condition or second hand value of the old one.  Also forget
what the old one cost new when you bought it.  What you should be
considering is what it would cost to replace the old one with
a new one *of the same kind* or nearest equivalent.  You said elsewhere
that the old one originally cost £1500 too, but *now* £1500 buys you
something better, and one just like the old one might only cost £1000
new now.  This means you could deduct £1000 as a renewal, and the other
£500 would go on the capital account.

See the example of Malcolm and his washing machine near the bottom of
<http://www.hmrc.gov.uk/manuals/pimmanual/pim3200.htm>

>>> Or is this something that comes under the 'wear and tear' or
>>> 'renewals' allownace?
>>
>>Yes, it is.  The TV is "contents".
> 
> Ok, I see, it looks like most appliance replacements will fall under
> this. Not sure where the official HM Revenue price list is though for
> me to work out how much a direct replacement for my 15 year old
> Zanussi F/Freezer is though.......

There isn't an official price list.  You need to be reasonable about
these things.  Fridge freezers don't all cost the same.  There are
cheap ones and expensive ones, basic ones, fancy ones, different
sizes, etc.  There are likely to be on the market now several models
of different manufacture which are roughly of the same specification
as your old one, and chances are they will all cost roughly the same
as each other.  If the one you buy is one of them, then the full cost
of replacing it (minus whatever, if anything, you get for the old one)
can be deducted as a renewal.  If what you buy is significantly more
expensive, then the price excess cannot be included in the deduction.

>>> Which of these two methods would yield a larger reduction? New TV
>>> £1,500, old TV not sold.
>>
>>Do not base the decision on one item.  Take a long term view.
>>If your rental income is (say) £6000 a year, the wear and tear
>>allowance means you are treated as if you were spending £600 a
>>year on repairs and renewals of contents (even if you aren't).
>>So if *on average* you expect to be spending more than £600 a
>>year on repairs and renewals of contents, then you would be
>>better off avoiding the WTA method and using actual costs
>>instead.  If less, obviously WTA is better.
> 
> That sounds like good advice. I would say typically my rental income
> is £8.5k
> Although not sure about the section that says *less any costs you pay
> that a tenant would usually pay* - what costs are those?
> 
> *The allowance is 10 per cent of the 'net rent' - this being the rent
> received less any costs you pay that a tenant would usually pay.*

Things like council tax and utilities.  If your tenants pay you a "pure"
rent and there is a separate kitty for council tax and utilities, then
the net rent is this pure rent.  But if your tenants pay you an all
inclusive rent, then you deduct utilities and council tax to arrive
at the net rent.  Insurance (for buildings and for landlord-provided
contents) is normally included in net rent, but insurance for the
tenants' own belongings is not.

>>> I'm interested in getting this right as the advice reads 'Once you've
>>> chosen which of these allowances to claim for a property, you can't
>>> switch between them from year to year.'
>>> 
>>> Which makes it sound like I can never change my mind?
>>
>>That is correct, you cannot change your mind.  But if your rental
>>business involves several properties, it's OK to use wear-and-tear
>>basis for some properties and actual repair/replacement basis for others.
> 
> That sounds good then, I think the 10% route would probably be the
> best bet long term. Maybe this is most popular with most people?

It is with me.

>>If you withdraw a property from your rental business and later
>>re-introduce it, then you can use a different basis.  So in a limited
>>way you *can* change your mind.  In the case of your home, you would
>>have to stop renting out rooms altogether for a bit before starting
>>up again.
>>
>>> In addition if I were to buy another house and rent out all room in
>>> that house, are my expenses 100% deductible?
>>
>>Yes, all expenses relating to *that* house would be deductible,
>>except to the extent that they relate to contents repairs/renewals
>>if you are operating WTA basis for that house.
> 
> I thought repairs were 100% deductible, it was the
> replacements/renewals that werent?

Yes, sorry, my mistake.  You can deduct repairs in any case.  It's only
renewals which are different.  If you do not operate the WTA scheme, then
you can deduct the cost of renewals and of repairs.  If you do claim WTA,
then you cannot deduct cost of renewals, only of repairs.

>>> And can (must?) I add income and expenses from my own home and the new
>>> house together or are they strictly separate? I think they are to be
>>> pooled together.
>>
>>They are pooled together in the sense that you only have one rental
>>business no matter how many properties it involves.  But because you
>>can decide on a house-by-house basis whether to go for WTA or actual
>>repair/renewals, you in effect have two sub-pools.
> 
> I see, so the income is one big pool,

Well the income is two sub-pools too.  One pool contains all the income
from unfurnished rental and from furnished rental from properties
on which you have decided not to claim WTA, the other pool is for
furnished rents on those properties on which you are claiming WTA.
The size of the 2nd pool is used to determine how much WTA you can
claim.  Then they are combined.

> but I calculate the WTA or
> renewals on a per property basis. My main concern was to make sure I
> could include any losses from one property and include that in the
> total.

Yes, all expenses are combined and set against combined income.

zeebop wrote:

> Thank-you both for your input.
> The old TV was £1,500 new (32" CRT). Now worth (£200 - £300).
> The new TV is 46" Plasma.
> 
> From what you say it is not a repair, and hence can only be deducted
> through the capital cost route.
> 
> I am still unsure which route to go for my own home. I receive in the
> region of £8.5k pa rental income. This year I will spend approx the
> following - the difficulty is for me to work out if it will be deemed
> a repair or improvement.
> 
> TV - £1,500
> (Old one works)

As said before.  If not claiming WTA, you would deduct what it would have
cost to replace the old one with a new one of the same kind, or the nearest
equivalent if they don't make them any more.

> Kitchen Renovation - £500
> To make the layout more practical

Deductible even if claiming WTA.

> Kitchen Flooring - £1,000
> Old Flooring 15 years old, usuable but worn

Deductible even if claiming WTA.

> Fridge Freezer - £700
> Old F/Freezer 15 years old, usuable but in worn condition

Deductible if not claiming WTA unless this is a "better" one.

> Dishwasher - £1,000
> Old D/Washer 15 years old and erratic

Deductible if not claiming WTA unless this is a "better" one.

> Decoarating (Communal Areas)
> £2,000 - to refresh 15 year old decorations

Deductible even if claiming WTA.

> Obviously my mortgage interest, utility bills, maintenance charges
> will remain under the allowable expense section.
> 
> I anticipate to spend only around £2,000 in future years in terms of
> items that would fall squarely into capital allowances. Although my
> standard allowable expenses would be in the £8k region.

Remember that the WTA covers the renewals of *contents*, the renewal of
*fixtures* (such as kitchen units) can still be deducted even if
claiming WTA.  There would be a grey area in the case of built-in
appliances.  They could count as fixtures rather than contents.  :-)

Alan Ferris wrote:

> Surely as it is the TV in his own home there is a problem with Wholly
> and exclusively here.  The TV is as much for him as for his rental
> business

You didn't need to quote the whole article to make that point.

Apportionment applies because the TV is in a communal area which
is used equally by himself and his two tenants.

Another way of thinking about it is that the TV and everything
else in the communal parts of the house is already wholly in the
rental business, and that as resident landlord he is himself one
of his three tenants.  :-)

On Sun, 08 Jun 2008 12:09:10 +0100, Alan Ferris
 wrote:

>On Sun, 08 Jun 2008 03:08:23 +0100, zeebop <yeah@um.right> wrote:
>
>>On Sat, 07 Jun 2008 21:20:53 GMT, Ronald Raygun
>><no.spam@localhost.localdomain> wrote:
>>
>>>zeebop wrote:
>>>
>>>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>>>> decucted. (I am not in Rent a Room Scheme)
>>>
>>>Do you mean you've already decided you don't want to be in the
>>>rent-a-room scheme, or that the rental income is more than the
>>>limit?
>>
>>I've decided I dont want to be in the Rent-A-Room scheme. My income is
>>around £8.5k. My allowable expenses (mortgage interest, utility bills,
>>service charges etc..) will be very close to this region as well.
>
>You do realise by claiming Mortgage interest you affect the Capital
>Gain when you come to sell it as you cannot claim PPR on the whole of
>the gain when you sell it. 


PPR? No plans to sell this property, but would be interested in what
issues I am causing.

On Sun, 08 Jun 2008 10:27:47 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>PeterSaxton wrote:
>
>> On 7 Jun, 21:19, zeebop <y...@um.right> wrote:
>>> Hi,
>>>
>>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>>> decucted. (I am not in Rent a Room Scheme)
>>>
>> Are you sure this is correct?
>> 
>> You rent 2 rooms out of 3 but there is a communal lounge. Who uses the
>> lounge? Is the longe one of the 2 rooms? Where do you live?
>
>I assume he means there are 3 bedrooms, and that he lives in one of
>them and rents out the other two.  The whole rest of the house is
>communal.


That is correct.

On Sun, 8 Jun 2008 08:58:45 +0100, "Tim"  wrote:

>"zeebop" wrote
>> Not sure how to define equivalent...
>...
>"zeebop" wrote
>> The old TV was ... 32" CRT ...
>> The new TV is 46" Plasma.
>
>Hehe.  Do you really think those are equivalent?
>

Well, technically the CRT has a higher quality picture, but I'll stop
before I get geeky....

On Sun, 08 Jun 2008 11:50:06 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>Alan Ferris wrote:
>
>> Surely as it is the TV in his own home there is a problem with Wholly
>> and exclusively here.  The TV is as much for him as for his rental
>> business
>
>You didn't need to quote the whole article to make that point.
>
>Apportionment applies because the TV is in a communal area which
>is used equally by himself and his two tenants.
>
>Another way of thinking about it is that the TV and everything
>else in the communal parts of the house is already wholly in the
>rental business, and that as resident landlord he is himself one
>of his three tenants.  :-)

That is how I saw it. I wouldnt consider trying to deduct the cost of
items that are physically in my bedroom.

On Sun, 08 Jun 2008 11:31:58 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> Thank-you both for your input.
>> The old TV was £1,500 new (32" CRT). Now worth (£200 - £300).
>> The new TV is 46" Plasma.
>> 
>> From what you say it is not a repair, and hence can only be deducted
>> through the capital cost route.
>> 
>> I am still unsure which route to go for my own home. I receive in the
>> region of £8.5k pa rental income. This year I will spend approx the
>> following - the difficulty is for me to work out if it will be deemed
>> a repair or improvement.
>> 
>> TV - £1,500
>> (Old one works)
>
>As said before.  If not claiming WTA, you would deduct what it would have
>cost to replace the old one with a new one of the same kind, or the nearest
>equivalent if they don't make them any more.

Thanks, although I may go down the WTA route as it seems much more
straightforward. Also, I would imagine these replacements will only be
done every 10 years or so.


>
>> Kitchen Renovation - £500
>> To make the layout more practical
>
>Deductible even if claiming WTA.

That does surprise me, as it is clearly not a repair, and maybe termed
an 'improvement', which is specifically excluded from allowable
expenses? In this specific example I am removing and discarding some
units as they make the layout awkward.
Not that I dont want to be able to claim the £500 :)

>
>> Kitchen Flooring - £1,000
>> Old Flooring 15 years old, usuable but worn
>
>Deductible even if claiming WTA.

Again, same as above.

>
>> Fridge Freezer - £700
>> Old F/Freezer 15 years old, usuable but in worn condition
>
>Deductible if not claiming WTA unless this is a "better" one.

Will go for WTA route.

>
>> Dishwasher - £1,000
>> Old D/Washer 15 years old and erratic
>
>Deductible if not claiming WTA unless this is a "better" one.

Will go for WTA route.

>
>> Decoarating (Communal Areas)
>> £2,000 - to refresh 15 year old decorations
>
>Deductible even if claiming WTA.

Sounds fair enough, as I would say this is clearly maintenance.

>
>> Obviously my mortgage interest, utility bills, maintenance charges
>> will remain under the allowable expense section.
>> 
>> I anticipate to spend only around £2,000 in future years in terms of
>> items that would fall squarely into capital allowances. Although my
>> standard allowable expenses would be in the £8k region.
>
>Remember that the WTA covers the renewals of *contents*, the renewal of
>*fixtures* (such as kitchen units) can still be deducted even if
>claiming WTA.  There would be a grey area in the case of built-in
>appliances.  They could count as fixtures rather than contents.  :-)

I thought the WTA was a flat 10% of net rent - regardless of what you
wanted to apply it to?

On Sun, 08 Jun 2008 11:22:19 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> On Sat, 07 Jun 2008 21:20:53 GMT, Ronald Raygun
>> <no.spam@localhost.localdomain> wrote:
>>>zeebop wrote:
>>>
>>>> I rent 2 of 3 rooms in my own home. Hence 2/3 of my expenses can be
>>>> decucted. (I am not in Rent a Room Scheme)
>>>
>>>Do you mean you've already decided you don't want to be in the
>>>rent-a-room scheme, or that the rental income is more than the
>>>limit?
>> 
>> I've decided I dont want to be in the Rent-A-Room scheme. My income is
>> around £8.5k.
>
>That's above the limit anyway, so it's just as well you don't want
>to be in it, because you can't be.

Not arguing the point or anything, but I understood you were allowed
to be in R-A-R-S, just that, clearly, you are unable to claim back
anything over the limit.

>
>>>> I was wondering if replacing an aging TV in the communal lounge is
>>>> acceptable. Is that 'maintenance and repair'?
>>>
>>>Yes, it is, but only if the replacement is equivalent.  Suppose the
>>>old one is an ordinary one, of which a straight replacement might
>>>cost £300, but you replace it with a whizzo huge flat plasma screen
>>>model costing £1500, then only £300 of the £1500 could be treated as
>>>"repair" and set as an expense against income, while the remaining
>>>£1200 would have to go on the capital account.
>>>
>>>Only if the old one is also a whizzo huge flat plasma screen model,
>>>could the entire £1500 be counted a "repair".
>> 
>> Not sure how to define equivalent. They both cost the same new,
>> £1,500. How do you mean the remaining £1,200 would have to 'go on the
>> capital account' Sorry for my ignorance, but how/what is the capital
>> account treated in terms of calculating my taxable liability.
>
>In any business there are two kinds of expenditure, namely one-off
>and recurring.  Likewise with income.  You can set recurrent expenses
>against recurrent income for income tax purposes.  You can set one-off
>expenses agaist one-off income for capital gains tax purposes.  But
>you can't generally mix them.
>
>Suppose you were to buy a flat to rent out.  The cost of buying it and
>of furnishing it cannot be set against rental income, only against the
>proceeds when you eventually sell the place.  This is the capital account.

I see. I think.... :)

>
>> It is the second point I am unsure of:
>> 
>>     * the amount you sold the old one for (if you got anything for it)
>>     * anything extra you paid for a better one
>> 
>> So new TV (£1,500) minus amount for old TV (£0), minus anything extra
>> I paid for a better one - I guess this is the £1,200 (given I could
>> buy my old one 2nd hand for £300). All very 'finger in the air' maths
>> this....
>> So the deductable amount is £300?
>
>My mind boggles at how much people spend on bloody tellies these days.
>In my example I assumed £300 would be the *new* cost of an ordinary
>telly, having assumed that the old one was also "ordinary".  You hadn't
>said before what the old one was, but now it seems it too was fancy,
>but not quite as fancy as what you're proposing to replace it with.
>
>Forget the condition or second hand value of the old one.  Also forget
>what the old one cost new when you bought it.  What you should be
>considering is what it would cost to replace the old one with
>a new one *of the same kind* or nearest equivalent.  You said elsewhere
>that the old one originally cost £1500 too, but *now* £1500 buys you
>something better, and one just like the old one might only cost £1000
>new now.  This means you could deduct £1000 as a renewal, and the other
>£500 would go on the capital account.
>
>See the example of Malcolm and his washing machine near the bottom of
><http://www.hmrc.gov.uk/manuals/pimmanual/pim3200.htm>


Again, to save me having to work this out everytime I replace an
appliance or similar, I think I will go for the WTA route, to receive
around £850 WTA each year.

>
>>>> Or is this something that comes under the 'wear and tear' or
>>>> 'renewals' allownace?
>>>
>>>Yes, it is.  The TV is "contents".
>> 
>> Ok, I see, it looks like most appliance replacements will fall under
>> this. Not sure where the official HM Revenue price list is though for
>> me to work out how much a direct replacement for my 15 year old
>> Zanussi F/Freezer is though.......
>
>There isn't an official price list.  You need to be reasonable about
>these things.  Fridge freezers don't all cost the same.  There are
>cheap ones and expensive ones, basic ones, fancy ones, different
>sizes, etc.  There are likely to be on the market now several models
>of different manufacture which are roughly of the same specification
>as your old one, and chances are they will all cost roughly the same
>as each other.  If the one you buy is one of them, then the full cost
>of replacing it (minus whatever, if anything, you get for the old one)
>can be deducted as a renewal.  If what you buy is significantly more
>expensive, then the price excess cannot be included in the deduction.
>

Thats me being a little sarcastic, sorry. Again, I will go the WTA
route.

>>>> Which of these two methods would yield a larger reduction? New TV
>>>> £1,500, old TV not sold.
>>>
>>>Do not base the decision on one item.  Take a long term view.
>>>If your rental income is (say) £6000 a year, the wear and tear
>>>allowance means you are treated as if you were spending £600 a
>>>year on repairs and renewals of contents (even if you aren't).
>>>So if *on average* you expect to be spending more than £600 a
>>>year on repairs and renewals of contents, then you would be
>>>better off avoiding the WTA method and using actual costs
>>>instead.  If less, obviously WTA is better.

I like the sound of WTA. :)

>> 
>> That sounds like good advice. I would say typically my rental income
>> is £8.5k
>> Although not sure about the section that says *less any costs you pay
>> that a tenant would usually pay* - what costs are those?
>> 
>> *The allowance is 10 per cent of the 'net rent' - this being the rent
>> received less any costs you pay that a tenant would usually pay.*
>
>Things like council tax and utilities.  If your tenants pay you a "pure"
>rent and there is a separate kitty for council tax and utilities, then
>the net rent is this pure rent.  But if your tenants pay you an all
>inclusive rent, then you deduct utilities and council tax to arrive
>at the net rent.  Insurance (for buildings and for landlord-provided
>contents) is normally included in net rent, but insurance for the
>tenants' own belongings is not.

Hm, thats a shame, so from the £8.5K, I would need to deduct approx
£3k, so my WTA allowance will be £5.5k ish (£550).
I need to see if there are ways I can increase this. Although still
probably better than the renewals route.

>
>>>> I'm interested in getting this right as the advice reads 'Once you've
>>>> chosen which of these allowances to claim for a property, you can't
>>>> switch between them from year to year.'
>>>> 
>>>> Which makes it sound like I can never change my mind?
>>>
>>>That is correct, you cannot change your mind.  But if your rental
>>>business involves several properties, it's OK to use wear-and-tear
>>>basis for some properties and actual repair/replacement basis for others.
>> 
>> That sounds good then, I think the 10% route would probably be the
>> best bet long term. Maybe this is most popular with most people?
>
>It is with me.
>
>>>If you withdraw a property from your rental business and later
>>>re-introduce it, then you can use a different basis.  So in a limited
>>>way you *can* change your mind.  In the case of your home, you would
>>>have to stop renting out rooms altogether for a bit before starting
>>>up again.
>>>
>>>> In addition if I were to buy another house and rent out all room in
>>>> that house, are my expenses 100% deductible?
>>>
>>>Yes, all expenses relating to *that* house would be deductible,
>>>except to the extent that they relate to contents repairs/renewals
>>>if you are operating WTA basis for that house.
>> 
>> I thought repairs were 100% deductible, it was the
>> replacements/renewals that werent?
>
>Yes, sorry, my mistake.  You can deduct repairs in any case.  It's only
>renewals which are different.  If you do not operate the WTA scheme, then
>you can deduct the cost of renewals and of repairs.  If you do claim WTA,
>then you cannot deduct cost of renewals, only of repairs.
>
>>>> And can (must?) I add income and expenses from my own home and the new
>>>> house together or are they strictly separate? I think they are to be
>>>> pooled together.
>>>
>>>They are pooled together in the sense that you only have one rental
>>>business no matter how many properties it involves.  But because you
>>>can decide on a house-by-house basis whether to go for WTA or actual
>>>repair/renewals, you in effect have two sub-pools.
>> 
>> I see, so the income is one big pool,
>
>Well the income is two sub-pools too.  One pool contains all the income
>from unfurnished rental and from furnished rental from properties
>on which you have decided not to claim WTA, the other pool is for
>furnished rents on those properties on which you are claiming WTA.
>The size of the 2nd pool is used to determine how much WTA you can
>claim.  Then they are combined.
>
>> but I calculate the WTA or
>> renewals on a per property basis. My main concern was to make sure I
>> could include any losses from one property and include that in the
>> total.
>
>Yes, all expenses are combined and set against combined income.

Thanks, any and all properties will be furnished and based on the WTA
method.

zeebop wrote:

> On Sun, 08 Jun 2008 11:22:19 GMT, Ronald Raygun
> <no.spam@localhost.localdomain> wrote:
>>zeebop wrote:
>>> 
>>> I've decided I dont want to be in the Rent-A-Room scheme. My income is
>>> around £8.5k.
>>
>>That's above the limit anyway, so it's just as well you don't want
>>to be in it, because you can't be.
> 
> Not arguing the point or anything, but I understood you were allowed
> to be in R-A-R-S, just that, clearly, you are unable to claim back
> anything over the limit.

Yes, you're right.

zeebop wrote:

> On Sun, 08 Jun 2008 11:31:58 GMT, Ronald Raygun
> <no.spam@localhost.localdomain> wrote:
>>zeebop wrote:
>>> 
>>> Kitchen Renovation - £500
>>> To make the layout more practical
>>
>>Deductible even if claiming WTA.
> 
> That does surprise me, as it is clearly not a repair,

But it's a renewal, isn't it?  As such it's "maintenance".
You don't expect kitche units to last forever, so periodic
replacement is normal expenditure, and therefore allowable.

> and maybe termed
> an 'improvement', which is specifically excluded from allowable
> expenses?

It would be an improvement if you replaced the units with fancier
ones, or with more of them.

> In this specific example I am removing and discarding some
> units as they make the layout awkward.
> Not that I dont want to be able to claim the £500 :)

You need to think of at as though the change of layout being
merely incidental to a renewal which was due anyway.

>>> Kitchen Flooring - £1,000
>>> Old Flooring 15 years old, usuable but worn
>>
>>Deductible even if claiming WTA.
> 
> Again, same as above.

No, this should not surprise you.  It basically falls into the
same category as redecorating.

>>> Decoarating (Communal Areas)
>>> £2,000 - to refresh 15 year old decorations
>>
>>Deductible even if claiming WTA.
> 
> Sounds fair enough, as I would say this is clearly maintenance.
> 
>>> Obviously my mortgage interest, utility bills, maintenance charges
>>> will remain under the allowable expense section.
>>> 
>>> I anticipate to spend only around £2,000 in future years in terms of
>>> items that would fall squarely into capital allowances. Although my
>>> standard allowable expenses would be in the £8k region.
>>
>>Remember that the WTA covers the renewals of *contents*, the renewal of
>>*fixtures* (such as kitchen units) can still be deducted even if
>>claiming WTA.  There would be a grey area in the case of built-in
>>appliances.  They could count as fixtures rather than contents.  :-)
> 
> I thought the WTA was a flat 10% of net rent - regardless of what you
> wanted to apply it to?

It is, but:

The purpose of the WTA is to take the place of the renewals basis
for contents.  This means that if you're opted in to the WTA scheme,
any expenses you incur in renewing items of contents (furniture,
appliances etc) become disallowable, but any expenses you incur in
renewing items which are not contents (fixtures and fittings, decor,
etc) remain allowable.

>>"zeebop" wrote
>>> Not sure how to define equivalent...
>>...
>>"zeebop" wrote
>>> The old TV was ... 32" CRT ...
>>> The new TV is 46" Plasma.
>>
> "Tim" wrote:
>>Hehe.  Do you really think those are equivalent?
>
"zeebop" wrote
> Well, technically the CRT has a higher quality
> picture, but I'll stop before I get geeky....

What, isn't the new plasma going to be Hi-Def?

zeebop wrote:

> On Sun, 08 Jun 2008 12:09:10 +0100, Alan Ferris
>  wrote:
>>
>>You do realise by claiming Mortgage interest you affect the Capital
>>Gain when you come to sell it as you cannot claim PPR on the whole of
>>the gain when you sell it.
> 
> PPR? No plans to sell this property, but would be interested in what
> issues I am causing.

When you sell a property which has been your main home (principal
private residence - PPR) for the whole time you've owned it, then
you get relief (private residence relief - PRR) against any capital
gain which has arisen - i.e. you don't pay capital gains tax - CGT
when you sell you home.

Where the use of the property has not been exclusively as your PPR,
e.g. if you rented out all or part of it, or if during the time some
other property has been your PPR instead, then you lose some of the
PRR.

For example if, by the time you sell this place, you will have been
renting out two thirds of it for the whole time you've owned it,
then, broadly speaking, two thirds of any capital gain in the value
of the property will become subject to CGT.

Ferrit doesn't have it quite right.  This has nothing to do directly
with claiming mortgage interest.  This liability arises as a result
of not using the whole property exclusively as your main home.

On 8 Jun, 12:50, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> Alan Ferris wrote:
> > Surely as it is the TV in his own home there is a problem with Wholly
> > and exclusively here.  The TV is as much for him as for his rental
> > business
>
> You didn't need to quote the whole article to make that point.
>
> Apportionment applies because the TV is in a communal area which
> is used equally by himself and his two tenants.
>
> Another way of thinking about it is that the TV and everything
> else in the communal parts of the house is already wholly in the
> rental business, and that as resident landlord he is himself one
> of his three tenants.  :-)

It certainly is a way of thinking about it. But it's a silly way!

On Sun, 8 Jun 2008 16:03:34 +0100, "Tim"  wrote:

>>>"zeebop" wrote
>>>> Not sure how to define equivalent...
>>>...
>>>"zeebop" wrote
>>>> The old TV was ... 32" CRT ...
>>>> The new TV is 46" Plasma.
>>>
>> "Tim" wrote:
>>>Hehe.  Do you really think those are equivalent?
>>
>"zeebop" wrote
>> Well, technically the CRT has a higher quality
>> picture, but I'll stop before I get geeky....
>
>What, isn't the new plasma going to be Hi-Def?
>

Certainly is, it is 1080p.

However, flat panel displays cannot match the black level of a CRT. So
often, night scenes lack detail on flat panels. This is not the case
with a CRT.

Black level example:
http://www.extremetech.com/article2/0,1697,1734383,00.asp

In addition, no artifacts are produced, for example in fast moving
scenes, or sport you wont get a 'blur' which wil happen to a degree
with flat panel. Some LCD's are particularly bad at this:

Pros of CRT
http://rochakchauhan.com/blog/2007/09/12/crt-vs-lcd-vs-plasma/

If you want more lines on your screen, then yes, a hi-def screen will
give you that.

If you post on a AV forum that flat panels are far superior to any CRT
you will most likely get shot down. Basically, you get better colours,
better contrast, no motion issues with a CRT.

On Sun, 08 Jun 2008 15:12:38 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> On Sun, 08 Jun 2008 12:09:10 +0100, Alan Ferris
>>  wrote:
>>>
>>>You do realise by claiming Mortgage interest you affect the Capital
>>>Gain when you come to sell it as you cannot claim PPR on the whole of
>>>the gain when you sell it.
>> 
>> PPR? No plans to sell this property, but would be interested in what
>> issues I am causing.
>
>When you sell a property which has been your main home (principal
>private residence - PPR) for the whole time you've owned it, then
>you get relief (private residence relief - PRR) against any capital
>gain which has arisen - i.e. you don't pay capital gains tax - CGT
>when you sell you home.
>
>Where the use of the property has not been exclusively as your PPR,
>e.g. if you rented out all or part of it, or if during the time some
>other property has been your PPR instead, then you lose some of the
>PRR.
>
>For example if, by the time you sell this place, you will have been
>renting out two thirds of it for the whole time you've owned it,
>then, broadly speaking, two thirds of any capital gain in the value
>of the property will become subject to CGT.
>
>Ferrit doesn't have it quite right.  This has nothing to do directly
>with claiming mortgage interest.  This liability arises as a result
>of not using the whole property exclusively as your main home.

Thank-you for clarifying that.
I need to get Excel out and work out if £8.5k income a year is a
greater benefit than 100% free of CGT when/if I sell.

Anyone know what house prices will be in 10 years?

On Sun, 08 Jun 2008 15:01:24 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> On Sun, 08 Jun 2008 11:31:58 GMT, Ronald Raygun
>> <no.spam@localhost.localdomain> wrote:
>>>zeebop wrote:
>>>> 
>>>> Kitchen Renovation - £500
>>>> To make the layout more practical
>>>
>>>Deductible even if claiming WTA.
>> 
>> That does surprise me, as it is clearly not a repair,
>
>But it's a renewal, isn't it?  As such it's "maintenance".
>You don't expect kitche units to last forever, so periodic
>replacement is normal expenditure, and therefore allowable.
>
>> and maybe termed
>> an 'improvement', which is specifically excluded from allowable
>> expenses?
>
>It would be an improvement if you replaced the units with fancier
>ones, or with more of them.
>
>> In this specific example I am removing and discarding some
>> units as they make the layout awkward.
>> Not that I dont want to be able to claim the £500 :)
>
>You need to think of at as though the change of layout being
>merely incidental to a renewal which was due anyway.
>
>>>> Kitchen Flooring - £1,000
>>>> Old Flooring 15 years old, usuable but worn
>>>
>>>Deductible even if claiming WTA.
>> 
>> Again, same as above.
>
>No, this should not surprise you.  It basically falls into the
>same category as redecorating.
>
>>>> Decoarating (Communal Areas)
>>>> £2,000 - to refresh 15 year old decorations
>>>
>>>Deductible even if claiming WTA.
>> 
>> Sounds fair enough, as I would say this is clearly maintenance.
>> 
>>>> Obviously my mortgage interest, utility bills, maintenance charges
>>>> will remain under the allowable expense section.
>>>> 
>>>> I anticipate to spend only around £2,000 in future years in terms of
>>>> items that would fall squarely into capital allowances. Although my
>>>> standard allowable expenses would be in the £8k region.
>>>
>>>Remember that the WTA covers the renewals of *contents*, the renewal of
>>>*fixtures* (such as kitchen units) can still be deducted even if
>>>claiming WTA.  There would be a grey area in the case of built-in
>>>appliances.  They could count as fixtures rather than contents.  :-)
>> 
>> I thought the WTA was a flat 10% of net rent - regardless of what you
>> wanted to apply it to?
>
>It is, but:
>
>The purpose of the WTA is to take the place of the renewals basis
>for contents.  This means that if you're opted in to the WTA scheme,
>any expenses you incur in renewing items of contents (furniture,
>appliances etc) become disallowable, but any expenses you incur in
>renewing items which are not contents (fixtures and fittings, decor,
>etc) remain allowable.

I see, I didnt realise that if I went for the 'renewal' route, as
opposed to the WTA route, it would disallow my decoration etc..
claims.

PeterSaxton wrote:

> On 8 Jun, 12:50, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> Alan Ferris wrote:
>> > Surely as it is the TV in his own home there is a problem with Wholly
>> > and exclusively here.  The TV is as much for him as for his rental
>> > business
>>
>> You didn't need to quote the whole article to make that point.
>>
>> Apportionment applies because the TV is in a communal area which
>> is used equally by himself and his two tenants.
>>
>> Another way of thinking about it is that the TV and everything
>> else in the communal parts of the house is already wholly in the
>> rental business, and that as resident landlord he is himself one
>> of his three tenants.  :-)
> 
> It certainly is a way of thinking about it. But it's a silly way!

Well, I wasn't being entirely serious, but why would you say it's
silly?  For instance, suppose one owned a holiday cottage.  One
might rent it out for x weeks in the year, and use it oneself for
y weeks in the year.  One way of keeping books would be to charge
oneself y weeks' rent at the going rate, and then set 100% of all
expenses against the combined (x+y) weeks' income.  The other would
be to count only x weeks' income, and to set x/(x+y) of expenses
against it.  The latter would be the orthodox way, and the former
you would presumably, by analogy, call silly, yet it has the
inherent simplicity of being able to treat the whole cottage
project as a pure business, with no faffing around with part-private
use, bearing in mind that x and y aren't going to be the same
year to year.  That's got to be a good thing, no?

zeebop wrote:

> On Sun, 08 Jun 2008 15:01:24 GMT, Ronald Raygun
> <no.spam@localhost.localdomain> wrote:
>>zeebop wrote:
>>> 
>>> I thought the WTA was a flat 10% of net rent - regardless of what you
>>> wanted to apply it to?
>>
>>It is, but:
>>
>>The purpose of the WTA is to take the place of the renewals basis
>>for contents.  This means that if you're opted in to the WTA scheme,
>>any expenses you incur in renewing items of contents (furniture,
>>appliances etc) become disallowable, but any expenses you incur in
>>renewing items which are not contents (fixtures and fittings, decor,
>>etc) remain allowable.
> 
> I see, I didnt realise that if I went for the 'renewal' route, as
> opposed to the WTA route, it would disallow my decoration etc..
> claims.

No, you don't see.  I didn't say that, and it wouldn't.

All repairs and maintenance are always allowable, be they to the structure
of the building, or to fixtures and fittings, or to moveable contents.

Renewals of fixtures and fittings are also always allowable, to the extent
that they's like-for-like.

L-f-l renewals of moveable contents are allowable if you are not claiming
WTA, but not if you are.

That is to say that the WTA is deemed to cover the cost of contents
renewals.  You can still claim fixtures renewals and all repairs and
maintenance *whether or not* you claim WTA.

On 8 Jun, 17:06, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> PeterSaxton wrote:
> > On 8 Jun, 12:50, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> Alan Ferris wrote:
> >> > Surely as it is the TV in his own home there is a problem with Wholly> >> > and exclusively here.  The TV is as much for him as for his rental
> >> > business
>
> >> You didn't need to quote the whole article to make that point.
>
> >> Apportionment applies because the TV is in a communal area which
> >> is used equally by himself and his two tenants.
>
> >> Another way of thinking about it is that the TV and everything
> >> else in the communal parts of the house is already wholly in the
> >> rental business, and that as resident landlord he is himself one
> >> of his three tenants.  :-)
>
> > It certainly is a way of thinking about it. But it's a silly way!
>
> Well, I wasn't being entirely serious, but why would you say it's
> silly?  For instance, suppose one owned a holiday cottage.  One
> might rent it out for x weeks in the year, and use it oneself for
> y weeks in the year.  One way of keeping books would be to charge
> oneself y weeks' rent at the going rate, and then set 100% of all
> expenses against the combined (x) weeks' income.  The other would
> be to count only x weeks' income, and to set x/(x) of expenses
> against it.  The latter would be the orthodox way, and the former
> you would presumably, by analogy, call silly, yet it has the
> inherent simplicity of being able to treat the whole cottage
> project as a pure business, with no faffing around with part-private
> use, bearing in mind that x and y aren't going to be the same
> year to year.  That's got to be a good thing, no?

I can agree with the idea when you have a separate property used for
your business but not when it's your PPR.

On Sun, 08 Jun 2008 16:19:19 GMT, Ronald Raygun
<no.spam@localhost.localdomain> wrote:

>zeebop wrote:
>
>> On Sun, 08 Jun 2008 15:01:24 GMT, Ronald Raygun
>> <no.spam@localhost.localdomain> wrote:
>>>zeebop wrote:
>>>> 
>>>> I thought the WTA was a flat 10% of net rent - regardless of what you
>>>> wanted to apply it to?
>>>
>>>It is, but:
>>>
>>>The purpose of the WTA is to take the place of the renewals basis
>>>for contents.  This means that if you're opted in to the WTA scheme,
>>>any expenses you incur in renewing items of contents (furniture,
>>>appliances etc) become disallowable, but any expenses you incur in
>>>renewing items which are not contents (fixtures and fittings, decor,
>>>etc) remain allowable.
>> 
>> I see, I didnt realise that if I went for the 'renewal' route, as
>> opposed to the WTA route, it would disallow my decoration etc..
>> claims.
>
>No, you don't see.  I didn't say that, and it wouldn't.
>
>All repairs and maintenance are always allowable, be they to the structure
>of the building, or to fixtures and fittings, or to moveable contents.
>
>Renewals of fixtures and fittings are also always allowable, to the extent
>that they's like-for-like.
>
>L-f-l renewals of moveable contents are allowable if you are not claiming
>WTA, but not if you are.
>
>That is to say that the WTA is deemed to cover the cost of contents
>renewals.  You can still claim fixtures renewals and all repairs and
>maintenance *whether or not* you claim WTA.

Just wondering about the implications of this comment:

===
However, it's worth considering the following: Your mortgage interest
payments can be deducted from rental income for tax purposes. However,
if you have a repayment mortgage, any capital payments can't be
offset. This means you'll have to pay tax on a larger part of your
income. That's why it can make a lot of sense to get an interest-only
mortgage instead, where the total mortgage payment can offset income.
===
http://www.fool.co.uk/mortgages/information/buy-to-let.aspx

Does this have any bearing on the WTA or renewals route?
My current mortgage (and next on a HMO) will be/are repayment.

zeebop wrote:

> Just wondering about the implications of this comment:
> 
> ===
> However, it's worth considering the following: Your mortgage interest
> payments can be deducted from rental income for tax purposes. However,
> if you have a repayment mortgage, any capital payments can't be
> offset.

Correct up to here.

> This means you'll have to pay tax on a larger part of your
> income.

All things being equal, this is incorrect.  At least to begin with,
if the same amount has been borrowed, and the interest rate is the
same, you'll be deducting the same amount of interest.  As the
balance outstanding slowly diminishes, the interest payments will
get smaller, so you can deduct less, and hence will be paying less
tax, but of course the amount of interest you pay less is more than
the amount of tax you pay more, so overall you still pay less.

> That's why it can make a lot of sense to get an interest-only
> mortgage instead, where the total mortgage payment can offset income.

This bit is pretty well rubbish.  You need to make some sort of
provision for repaying the loan.  Doing so early is always a good
idea, especially of there is any danger of the asset failing to
appreciate as much as one may have hoped.

> ===
> http://www.fool.co.uk/mortgages/information/buy-to-let.aspx
> 
> Does this have any bearing on the WTA or renewals route?
> My current mortgage (and next on a HMO) will be/are repayment.

None whatsoever.  Interest is one allowable expense, insurance
is another, repairs is another, and renewals is another.
They're all independent, and they're all allowable.

The only thing is that if you elect to claim the WTA, then you
are making renewals of contents disallowable.  Everything else,
including renewals of non-contents, remains allowable.