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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5029
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hello, I have a question regarding tax deductability of expenses

Resolved Question:

Hello,
I have a question regarding tax deductability of expenses following the installation of upvc windows, loft and cavity insulation and a new boiler in a buy to let property.
From reading my way through various online materials including HMRC documtation, I believe they would qualify as revenue expenses and would therefore be tax deductible against rental income. If I were to fund the above repairs through a Green Deal loan, would the monthly charges on the electricty bill, which include loan and interest repayment, also be fully tax deductible as well or could I only claim the interest expense?
Thank you very much for your kind attention.
Kind regards,
Terry
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Interest payments are regarded as revenue expense and are therefore a deductible expense.

Loan is capital and repayment of capital is outside the profit & loss account and is not deductible in arriving at your profits

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 3 years ago.

Hello,

thanks for the fast response. I understand that interest is deductible and capital is not.

My questions is more related to the specifics of the Green Deal financing structure from home eco improvements. If I had paid for the repairs myself without the Green Deal Financing structure, the invoice would be tax-deductible as it would be classified as a revenue expense (e.g. like for like replacement at current standards). Given that I don't receive an invoice from the Green Deal provider but am paying for the product and service through a special financing arrangement - e.g. electricity charges me for the installation and the interest on the payment - I would expect that the full amount charged should be tax deductible. The product and services have not changed, the way I pay for them have.

Could you please revisit the question.

Thanks

Terry

Expert:  taxadvisor.uk replied 3 years ago.
Terry, thank you for your question.

I have looked at another site where Green Deal Finance is explained.

If you are borrowing money and then this money is applied to replace item that bring energy efficiency and the items of expenditure are of revenue nature in accounting terms then the cost of these items would be deductible as an expense. If you are paying for these items over a period as opposed to in one instalment then the installments would be deductible as and when paid.

So in your case, if your monthly payments cover the cost of energy efficient items of expense and the cost of finance then both would be deductible.

I hope this is helpful.
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Customer: replied 3 years ago.

great. Thank you for the clarification.

Expert:  taxadvisor.uk replied 3 years ago.

I thank you for accepting my answer.

best wishes.