Relief for replacement domestic items
Where a landlord lets out a property, it is likely that some domestic goods will be provided. Therefore, at some point the landlord will need to replace these goods.
Tax relief is available for the replacement, but not the initial purchase, of domestic goods, as long as certain conditions are met.
Relief is available if the following conditions are met.
- Condition A – the individual or company must carry on a property business that includes the letting of one or more residential properties.
- Condition B – an old domestic item which has been provided for use in the property is replaced with a new domestic item. The new item must be for the tenants’ exclusive use, and the old item must no longer be available to them.
- Condition C – the expenditure is incurred wholly and exclusively for the purposes of the property business, and a deduction would be otherwise prohibited as capital expenditure.
- Condition D – capital allowances have not been claimed in respect of the expenditure.
Where the above conditions are met, relief is available for the cost of the replacement domestic item unless the property is a furnished holiday letting or rent a room relief has been claimed.
What items count as domestic items?
Domestic items are items for domestic use. The definition is wide and includes moveable furniture, such as sofas, tables, bed frames, wardrobes; furnishings, such as curtains and carpets; household appliances, such as fridges, freezers, washing machines; and kitchenware, such a utensils, crockery, cutlery etc.
Nature of the relief
Relief for the cost of the replacement item is given as a deduction in computing the profits of the property business.
However, the amount of the deduction is limited to that for a ‘like for like’ replacement. Where the replacement is superior to the original – for example if a washing machine was replaced with a washer dryer – the relief is capped at the cost of a replacement which is equivalent (in current day terms) to the original.
Relief is also available for incidental costs, such as the costs of delivery or disposal. However, the deduction is reduced for any money received in respect of the old item.
In 2018/19 a landlord who lets a furnished property replaces the old fridge with a fridge freezer costing £500. An equivalent fridge would have cost £300. He also replaces a sofa with a similar sofa. The replacement costs £600. He pays £30 for the fridge freezer to be delivered, and £15 for the old fridge to be disposed of. He sells the old sofa for £50.
Under replacement domestic item relief, he can claim a deduction for £345 in respect of the fridge-freezer, being the cost of a like-for-like fridge plus the costs of deliver and disposal. He can also claim a deduction of £550 in respect of the sofa, being the cost of the replacement sofa less the proceeds from the sale of the old sofa.
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