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If I buy a run down house, renovate it, without extending it.

Resolved Question:

If I buy a run down house, renovate it, without extending it. Can I deduct my costs of the renovation from the profit on the sale, say 1.5 years later, to reduce the capital gain.
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Thanks question
If the costs are relating to full capital improvements such as new kitchen , bathroom roof, central heating - rather then repairs and general decorations or new carpets, flooring then those costs are allowable from the gain at the time of sale.
But any decoration that has to be done as a result of the new kitchen or bathroom is allowable (so if you rip an old bathroom out and put in a new one, then clearly tiling, painting and new flooring costs would be permissible as arose due to the taking out of the old and the putting in of the new.
Let me know if you wish any further information regarding this.
Thanks
Sam
Customer: replied 2 years ago.

Many thanks, ***** ***** with non allowance of repairs. The purchase price was low because repairs were necessary to plasterwork and chimney. The resulting "profit" was partly a result of the repairs.

would these costs still not be allowed.

Dave

Expert:  Sam replied 2 years ago.
Dave
No I am afraid not, as these are just general repairs - capital gains only permits capital improvements (and costs to buy and sell) as valid deductions from the gain.
The only time ALL costs are allowable, is when you plan to trade in property renovations and then every expense is allowable, but then your "profits" are subject to income tax, not capital gains - and there is no annual exemption allowances (which allows the first £11,000 tax free) and of course the tax rates are higher tax.
If you plan to do this again, then HMRC will view even this first build as a trade, its only when its a one off, or the property is held long tern as to generate rents from tenants that capital gains or just a genuine second property etc
Do let know if you have any more you wish me to expand on, but it would be appreciated, if you could rate the level of service I have provided (or click accept)
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13808
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 2 years ago.

Many thanks,

Excellent service.

Regards, Dave

Expert:  Sam replied 2 years ago.
Dave
You are very welcome, if you could click accept, or click the rate button it would be appreciated
Thanks
Sam

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