Furniture purchased before lease began?

AlphabetSoup2

Hi

I am a first time landlord and am getting an accountant to do my first tax returns in case I miss anything. However, I am a bit confused about what expenses to allow for.

I used to live in the property but rented it out for the first time in 2012. I had done some research on this and other forums and it seemed to me that I couldn't allow for repainting and minor repairs that I had carried out before the tenant moved in as this was prior to the date of first letting.

However, the consensus on the internet seems to be that I can allow for depreciation of furniture even if it was purchased prior to letting. I bought most of it in 2006 so I thought I could allow for 12.5% of the original value each year until 2014. However, my accountant says that revenue don't allow you to apply depreciation on any items purchased before the lease commenced.

I've looked at the revenue site and it seems unclear. Normally I would listen to a professional over something I read on a forum but so many people online seem to agree that it makes me wonder. Is this something that revenue have recently changed their stance on? Does anyone have a link to legislation that confirms one view or the other? I'm not looking to claim allowances I'm not entitled to, I just want to make sure I don't miss out on any.

Thank you

ramacc

Assuming the property is let during the year than a full years capital. allowances should be available at 12.5% not depreciation.

dbran

Hi

Your accountant is correct.

The wear and tear allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms on the open market.

If the expenditure was incurred when you were living in the house then it would fail this test as it was incurred in your personal capacity and for your own personal use while you were living there and not for use in a dwelling that was going to be let.

dbran

barneystinson

dbran wrote: »

Hi

Your accountant is correct.

The wear and tear allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms on the open market.

If the expenditure was incurred when you were living in the house then it would fail this test as it was incurred in your personal capacity and for your own personal use while you were living there and not for use in a dwelling that was going to be let.

dbran

I think, in practice DBran, that Revenue take a pragmatic approach to this one - particularly as the reality is that a majority of houses are let furnished. (Or dare I say it, plenty of Revenue staff actually aren't aware of this oddity in the rules...!)

It wouldn't be very equitable to say to one landlord that they can have capital allowances because they were always intending to let it, while telling another landlord with the same capital outlay that they can't have them.

I've never seen Revenue take issue with a situation where the landlord takes 12.5% W&T over the remainder of the 8-year tax life of F&F where a PPR becomes a rental property. I'd be interested to hear others' experiences..??

dbran

Perhaps....

Any cases such as this I have come across have been "aspect queries" rather then full audits and as such have not been investigated to any great degree.

dbran

AlphabetSoup2

Thanks for the replies. It's an interesting one; based on what I have read, there are a lot of people allowing for wear and tear of furniture purchased a number of years prior to letting. However, I want to follow the rules so will not allow for it.

dbran, you say that the wear and tear is only allowed for expenses occurred wholly and exclusively in respect of a house which is to be let. I bought a washer dryer and fit a new carpet shortly before the lease began but after I had moved out so it was purely for the tenant's benefit. Can I allow for these or is it only allowed for items purchased after the date of first letting?

Thanks

barneystinson

AlphabetSoup2 wrote: »

Thanks for the replies. It's an interesting one; based on what I have read, there are a lot of people allowing for wear and tear of furniture purchased a number of years prior to letting. However, I want to follow the rules so will not allow for it.

dbran, you say that the wear and tear is only allowed for expenses occurred wholly and exclusively in respect of a house which is to be let. I bought a washer dryer and fit a new carpet shortly before the lease began but after I had moved out so it was purely for the tenant's benefit. Can I allow for these or is it only allowed for items purchased after the date of first letting?

Thanks

You can definitely allow wear&tear on those items, no question about that.

dbran

Yes no problem with those.