Removal of tax break on replacing white goods and furnishings harmful for landlords and tenants
The Chartered Institute of Taxation (CIOT) is concerned that both tenants and landlords will lose out as a result of HM Revenue & Customs’ (HMRC) removal of a relief for the replacement of some white goods, furniture and soft furnishings. The Institute predicts the move will give rise to additional costs for private landlords, and that these costs will be transferred onto tenants.
Landlords can no longer claim tax relief for the replacement of free standing white goods in unfurnished residential lettings, HMRC have confirmed. This measure came into effect in April 2013, and HMRC confirmed their position in response to a joint letter by the CIOT and the Institute of Chartered Accountants of England and Wales (ICAEW). HMRC is allowed to offer what are called ‘extra-statutory concessions’ – a small tax break – in cases where it feels the law doesn’t meet the hardship at its margins, allowing for slight relaxations in the law which would otherwise financially harm the taxpayer.
Brian Slater, Chair of CIOT Property Taxes Sub-Committee commented:
“The concession, as it previously existed, provided incentives for private landlords to maintain their properties by offering tax relief for the costs of replacing white goods and other furnishings. Additionally, tenants who might otherwise have been forced to manage with worn out furnishings and broken fridges benefited from the replacements. This incentive no longer exists, likely creating an increased level of tension between landlord and tenant over costs and maintenance.
“Additionally, what can be classed as a ‘replacement’ or a ‘repair’, is sometimes complex turning on fine distinctions. While the Government has been taking real steps to engage with landlords and help them understand the taxes which affect them, the removal of this tax relief will only create more confusion, apparently denying relief for what is quite rightly seen as a legitimate business cost.”
Notes to editors:
1. Extra-Statutory Concession
An Extra-Statutory Concession is a relaxation which gives taxpayers a reduction in tax liability to which they would not be entitled under the strict letter of the law. Most concessions are made to deal with what are, on the whole, minor or transitory anomalies under the legislation and to meet cases of hardship at the margins of the code where a statutory remedy would be difficult to devise or would run to a length out of proportion to the intrinsic importance of the matter.
2. The joint CIOT/ICAEW letter can be accessed here.
3. HMRC’s response to the letter can be accessed here.
4. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
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