zeebop said:
The key element in your response for me was the fact that WTA is
irrelevant if my overall expenses exceed the income, which I believe
(even at 2/3) will be the case.
I think I was unclear. I meant that in circumstances when expenses
will regularly exceed income, i.e. if you're usually going to be
making a loss, then there will never be any tax to pay, and therefore
it may well not matter whether you account for furniture renewals on
an actual costs basis or by means of the WTA. If your *non-contents*
expenses are already sufficient to create a loss, then there is no
need to worry about whether WTA or renewals basis is the better method
for accounting for contents replacements, but if not, then (assuming
money is more important than convenience) you will still need to make
a judgement whether or not to opt for WTA.
You should go for whichever will *in the average year* be bigger.
Unless you renew often and to high spec, I reckon you're usually better
off with WTA. But you do need to think long-term because if you opt
into WTA, you won't be able to opt out again until the property in
question ceases to be part of your rental business, or possibly if it
changes status to unfurnished and then back to furnished again.
I expect you can use WTA to create or increase a loss capable of being
carried forward to set against future profits in the same way that
you would otherwise use actual renewal costs.
The main thing to remember, though, is that all this applies only to
contents and not to the property itself or to anything affixed to it.
So the cost of replacing a kitchen sink would be allowable even if
you had opted for WTA, but the cost of replacing a kitchen table
would not.
Take the case of a washing machine. It's broken beyond repair and
you replace it with something equivalent. If you did not opt for
WTA then the entire replacement cost becomes an expense. If you did,
then you're expected to pay for it out of your own pocket. There is
a grey area here: I thought that WTA covered not just renewals but
repairs as well, so that if the machine breaks but can be (and is in
fact) repaired, then under WTA the repair costs would also come out
of your own pocket, but now I think I was mistaken, and that you can
actually expense the repairs even if you're under the WTA regime,
only the renewal costs would be disallowed.
However, I will make sure that in the appropriate areas I claim 100%
for improvements that were wholly for tenants - I didnt realise this
previously.
My focus at the moment is making sure I am allowed to claim for the
costs that I want to. For example under expenses:
===
- maintenance and repairs to the property (but not improvements)
===
Hopefully this encompases redecoration (painting),
It does.
however I'm not
sure if it will cover costs of reflooring an old (15-20 year) carpet
and replacing it with a hard wearing surface.
It should do, provided it was fitted carpet, which would make it count
as a fixture, part of the property. A loose carpet would be contents.
A hard wearing surface? I take it you mean something like lino or
perhaps laminated flooring. You'd need to consider what it would
have cost to replace the fitted carpet with another similar fitted
carpet. If the alternative costs more, the excess would be an
"improvement" (the cost of an improvement would be allowable against
your CGT account but not against your income), but you could still
expense what the carpet would have cost. Alas, if the alternative
costs less than the carpet, this would be an "un-improvement" and
you could only expense its actual cost instead of what the carpet
would have cost, even if you wanted to charge the difference as an
item of capital un-expenditure.
