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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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We have rented a commercial property new business premises.

Customer Question

We have rented a commercial property for our new business premises. We paid for someone to come in and lay a new parquet floor and also paint the walls. Would this be capital fixtures and fittings which AIA can be claimed for or just maintenance expense?
We also had to "make good" our old premises when we moved out by painting and removing items we had put in. How should we treat these costs?
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Hello and welcome to the site. Thank you for your question.

I would be tempted to treat these costs as property repairs and maintenance and not capital expenditure. These include laying a new parquet floor, painting the walls and removal of items.

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 1 year ago.

Thanks for the quick response. I don't think that is enough for me to go on, so have followups if that's OK.

On what basis have you chosen revenue over capital? What is the main criteria i need to consider when reviewing the costs? When you say you would be "tempted" to treat these costs as property repairs, does this mean HMRC would maybe have a different view?

Expert:  taxadvisor.uk replied 1 year ago.

Nicole, thank you for your reply.

If you were for example replacing all windows instead of one or two, the expenditure would be regarded as capital.

HMRC would also apply the reasonableness test. I would regard these as revenue based on experience and nature of expense.

the criteria for deciding whether it is capital or revenue is the nature of expense and amounts involved. HMRC are happy to let costs of under £750 be regarded as revenue expense and one could quite easily spend this sort of money on painting and minor repairs. Extensive alterations to a building would be deemed capital.

More information on this can be found here

http://www.hmrc.gov.uk/manuals/pimmanual/pim2020.htm

I hope this is helpful..

Customer: replied 1 year ago.

OK thanks, ***** ***** sense. Maybe I should have provided the amounts then. The spend here was quite high as it is an upmarket London address with an excellent finish required -> £10k split roughly £5k materials and £5k labour (to cover the parquet flooring, paint walls of office/meeting rooms/kitchen/b/room and removal of a wall of filing cabinets in a meeting room).

Should have specified amounts upfront, apologies.

Does this change your opinion at all even though the nature of the expenditure is the same?

Expert:  taxadvisor.uk replied 1 year ago.
Nicole, thank you for your reply..

Painting of walls interior and/or exterior would be revenue expense.
removal of one wall to make room for filing cabinets - I would still regard this as repairs and maintenance charge.

In my opinion, your expenditure is of revenue nature and not capital...

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it by Just Answer.

taxadvisor.uk and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

Hi, thanks for your advice. Just to let you know the reason I gave good instead of excellent service as a rating is that the initial response was very brief and I had to take some time to work out exactly what I needed clarification on and why (which I wasn't completely sure of!). Would have been useful to have been driven a bit more from your end based on the key points to consider. All the best and thanks again.

Expert:  taxadvisor.uk replied 1 year ago.
Nicole, thanks for your reply.

The response may have been brief but it was correct.

Best wishes

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