Property Income

Reform of Wear and Tear Allowance

The wear and tear allowance and the renewals allowance for property businesses will be repealed and replaced, for expenditure incurred on or after 1 April 2016 for corporation tax and on or after 6 April 2016 for income tax. The new legislation will allow instead a deduction for capital expenditure incurred by a lessor on replacing furnishings, appliances (including white goods) and kitchenware no longer available for the use of a lessee in a dwelling-house. Relief is not available for fixtures.

Where the new item is substantially the same as the old item, the deduction is equal to the expenditure incurred on the new item. Where the new item is not substantially the same, the deduction is limited to the amount which would have been incurred if it were substantially the same. In addition, a deduction is permitted for incidental capital costs of disposing of the old item or acquiring the replacement, less any amounts received, either by the lessor or a person connected with them, on disposal of the old item.

The legislation accommodates part-exchanges and letting arrangements without a formal lease.

The deduction will not be available for furnished holiday lettings or if rent-a-room relief is claimed in respect of the dwelling-house.