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Buying a dilapidated property to restore and rent?

Paystream News

David McManus

Friday 24th Nov, 2017

Repairs to reinstate a worn or dilapidated asset are usually deductible as revenue expenditure but if you acquired a property that wasn't in a fit state for letting until the repairs had been carried out, this would be an indicator the repairs were capital in nature.

The underlying principle is that the cost of buying a property in good condition is clearly capital expenditure. Hence the cost of buying a dilapidated property and putting it in good order to be able to let it is also capital expenditure.

If you are considering doing some or all of the repair work yourself don't forget that you cannot deduct anything from the rental calculation for your own time.

Finally, as a contractor you may be used to claiming the HMRC approved mileage rate of 45p for business mileage. However you cannot make this type of claim in respect of a rental business. If you have had to incur travel costs wholly and exclusively for the purposes of the business you will need to calculate the apportioned costs of all car expenses and make a claim for that proportion relating to the letting business (usually based on mileage records).