Capital Allowances for tax return

mandy2012

Hi, can someone explain Capital Allowances for rental income.
I get that you can deduct 12.5% off cost of furniture for 8 years.
but if you have to do up the property and get new furniture for new tennant can you start again or is it just once that you are allowed to claim.

Edgware

mandy2012 wrote: »

Hi, can someone explain Capital Allowances for rental income.
I get that you can deduct 12.5% off cost of furniture for 8 years.
but if you have to do up the property and get new furniture for new tenant can you start again or is it just once that you are allowed to claim.

I add on the 1/8th to my present claim and when the earlier claim has reached 8th years I deduct that figure and continue until that is expired.
e.g
I am claiming capital allowance of 500 per year and I am in year five.
Then I sped 3200 so have an additional 400 over the next 8th years

My annual claim will be
Year 6. 500 + 400 = 900
Year 7. 900
Year 8. 900

Then my first lot has expired so you will have three years of your latest claim gone so it will revert to
Year 4. 400
Year 5. 400
and so on up to end of Year 8

This is how I have done it and it has never been questioned.
I also claimed 500 per year unvouched for travel costs for inspection of property and again never queried.

I cant help but get the feeling that Revenue gets tax on rentals, C.G.T. Inheritance tax so easy that they wont bother their holes unless a claimant is really chancing his arm.
The taxpayers accountant does all the work for them

mandy2012

thanks Edgware, is this right you claim for 8 year but say if you replace washing machine in year 7 you can claim for 8 years again. I thought you only got one chance at start of tenancy to claim 8 years and if you replace item its also in the original 8 years. I now have to replace everything for new tenant and wonder can I claims for all new stuff again for another 8 years ?

riclad

I Think you could buy a fridge , say for 800 euro,s ,
claim 100 euro,s a year .
in 9 or 10 years time ,you could buy another fridge and claim for it,
Things break down and need to be replaced .
just make sure to hold onto receipts in case there,s any questions from the revenue about an item.
Can you claim for a tv and a saorview reciever as a capital allowance .
An oven may break down after 5 years , and it make more sense to buy a new oven , rather than fix the old one.
i notice in the online rental income form 12 tax return , there,s just a line capital allowance,s .
Theres, no space or notes to put in more information ,eg say i,m claiming this year for a new fridge and a cooker bought in 2018 .
You just put in x amount eg 450 euro,s capital allowance for 2018.

mandy2012

Ok. So reading between the lines. If I purchase an item I can claim for 8 years after I buy it then it stops in 8 years time until I purchase something again.

riclad

Say you buy a fridge for 400 euro,s , you claim 400 divided by 8 =50,
eg claim 50 euro,s per year for the fridge over the next 8 years .

Most landlords claim for 3 or 4 items per year under the title of capital allowance,s , eg fridge ,oven, new carpets, etc
So you need to keep a record of all the item,s you bought and when you bought them .
in year one of renting the property you might buy a fridge, in year 3 you might buy a cooker .

You can only claim for 8 years for any single item .
so divide cost of item by 8 ,
if you buy an item in 2020 , you have to claim the cost over the next 8 years .

Edgware

mandy2012 wrote: »

Ok. So reading between the lines. If I purchase an item I can claim for 8 years after I buy it then it stops in 8 years time until I purchase something again.

Yes. You cant claim for what you didnt spend. I am not an expert and I have used an accountant. I would advise that you do so as they know all the ins and outs especially if you are married. I dont understand it allbut I do go through the accounts item by item every year.
Remember to receipt everything even 3.50 for a new key. It all helps to cut the tax bill

Lucifer

You can spend money any year you want. Have a look at this and see if you get what we mean

davindub

Op claim capital allowances whist the item is in use only, until the tax written down value is 0.

On disposal, you can claim a balancing charge on the difference between the twdv and any money recieved or if not disposing ( eg keeping in storage) just stop claiming allowances.

Probably you would get a tax return done (assuming just a rental) for a few hundred euros by an accountant, also tax deductible.

mandy2012

Thanks for all your replies. I understand it now. When I purchase an item I can claim for 8 years and can only claim once.

handlemaster

get an accountant and save yourself this hassle, you will probably not get it right and cost yourself more money

riclad

You can claim the accountants fee,s as an expense, against your rental income .
they charge about 300 euro,s for a standard tax return.