Tax allowances for building replacement?

[Pond digger]

Im talking about replacement of a dilapidated building with new. Is the full cost still elligable for tax relief, and if so, at what rate?

Next question: if the replacement building exceeded the original footprint, would that disqualify the total from eligibility for tax allowances, or would it be calculated proportionally?

 

[Lincsman]

Not sure you can get anything if its new and not repaired.

 

[Goweresque]

Repairs count as 100% business expenses, knocking down a dilapidated shed and replacing with a brand new one,even of exactly the same size, is not allowable at all. Not for capital allowances or for expenses. You have to build a new shed out of taxed income. Some fixtures and fittings may qualify for capital allowances (cattle handling equipment, grain walling, slurry tanks, that sort of thing), but the basic building gets no allowances. Mad, but there it is.

 

[Nearly]

Invoicing is key.
(I've heard)

 

[kill]

Just replaced a shed and unless it's 100% only of the original foot print my accountant say it's not eligible against tax.

 

[Lincsman]

You can use it against any capital gains though.

 

[J B]

Invoicing is key.
(I've heard)

Indeed
You are not replacing it, you are repairing it ... surely.

 

[Goweresque]

Just replaced a shed and unless it's 100% only of the original foot print my accountant say it's not eligible against tax.

Your accountant has shall we say an 'interesting' view of tax law then:

"The general position is that the cost of :  a repair is normally allowable expenditure, but  replacing the asset or of making a significant improvement to the asset as a whole (the 'entirety') will be capital expenditure and not allowable as a deduction."

https://www.gov.uk/government/uploa...t_data/file/355656/draft-guidance-repairs.pdf

Edit: a specific case that went before the tax inspector, who found that new buildings replacing old were capital expenditure, not repairs here:

https://www.taxation.co.uk/articles/2005/04/14/3121/replies-queries-repairs-or-renewals

 

[Nearly]

You can use it against any capital gains though.

So use capital expenditure to offset a capital gain? Haven't heard of that one even in my flexible little world.
Hope so.

Edit
Capital expenditure on one property and keep records to reduce the taxable gain on sale of that property. Definitely.
Dream scenario would be capital expenditure at one farm (build shed) to offset capital gain on selling other land. That would be basically rollover into new buildings which isn't allowed?

 

[Lincsman]

So use capital expenditure to offset a capital gain? Haven't heard of that one even in my flexible little world.
Hope so.

Edit
Capital expenditure on one property and keep records to reduce the taxable gain on sale of that property. Definitely.
Dream scenario would be capital expenditure at one farm (build shed) to offset capital gain on selling other land. That would be basically rollover into new buildings which isn't allowed?

Why not?, but i sold land and offset some of the cap gain on a building put up the year before (you can roll back 1 year)

 

[Nearly]

Why not?, but i sold land and offset some of the cap gain on a building put up the year before (you can roll back 1 year)

on that land yes, but on other land and not selling the building?

 

[Lincsman]

on that land yes, but on other land and not selling the building?

It will only be listed on the tax form as capital gain, so I dont see why not... but I advice is worth what you paid for it... just in case you might want to, you can roll gain over into a space craft.

 

[Nearly]

It will only be listed on the tax form as capital gain, so I dont see why not... but I advice is worth what you paid for it... just in case you might want to, you can roll gain over into a space craft.

or aircraft

 

[Pond digger]

Your accountant has shall we say an 'interesting' view of tax law then:

"The general position is that the cost of :  a repair is normally allowable expenditure, but  replacing the asset or of making a significant improvement to the asset as a whole (the 'entirety') will be capital expenditure and not allowable as a deduction."

https://www.gov.uk/government/uploa...t_data/file/355656/draft-guidance-repairs.pdf

Edit: a specific case that went before the tax inspector, who found that new buildings replacing old were capital expenditure, not repairs here:

https://www.taxation.co.uk/articles/2005/04/14/3121/replies-queries-repairs-or-renewals

Hmmm; if that's right it seems rather unjust if the only practical solution to delapidation is replacement. I would have thought its a debatable point, dependent on individual circumstances. However, yes, I can understand the argument if it's more an issue of replacement.

 

[Pond digger]

PS. I can remember my accounted mentioning some dispute with the Revenue over the replacement of wooden framed greenhouses, with aluminium: the point being that it was no longer a feasible/ practical choice to replace like for like. I can't remember the exact details, or even whether it was in regard to Capital, or income tax.

 

[Goweresque]

Hmmm; if that's right it seems rather unjust if the only practical solution to delapidation is replacement. I would have thought its a debatable point, dependent on individual circumstances. However, yes, I can understand the argument if it's more an issue of replacement.

The point is that there is no allowance for NEW buildings. Therefore its follows that if your building is dilapidated to the point of being beyond economic repair then its working life is finished and it can only be replaced by a brand new one. Which is not allowable. The law is quite clear on the matter, and anyone (or their accountant) who is trying to play fast and loose with the tax code on this is leaving themselves open for having to pay back fair sized sums of tax (plus penalties no doubt) if they are ever inspected. And the inspectors can go back 7 years...........

 

[Goweresque]

PS. I can remember my accounted mentioning some dispute with the Revenue over the replacement of wooden framed greenhouses, with aluminium: the point being that it was no longer a feasible/ practical choice to replace like for like. I can't remember the exact details, or even whether it was in regard to Capital, or income tax.

Greenhouses could probably count as a capital allowance anyway, as they might be considered a 'growing system' rather than a building - a greenhouse is a considerably different beast to a GP agricultural shed.

There are provisions on the repairs regulations that allow for modern materials to be used in a repair, and it still be called a repair, if it is considered that the use of better materials has now become standard use. But you aren't allowed to improve the building, otherwise its not a repair. Its all in the HMRC guidance I linked to above.

 

[Pond digger]

The point is that there is no allowance for NEW buildings. Therefore its follows that if your building is dilapidated to the point of being beyond economic repair then its working life is finished and it can only be replaced by a brand new one. Which is not allowable. The law is quite clear on the matter, and anyone (or their accountant) who is trying to play fast and loose with the tax code on this is leaving themselves open for having to pay back fair sized sums of tax (plus penalties no doubt) if they are ever inspected. And the inspectors can go back 7 years...........

Yes, I see your point.

Thanks

 

[Nearly]

Looking at 'repairing' an asbestos (6m x 20m) Nissen hut with a portal frame (6m x 10m) on half of same concrete pad. Kit building frame would be about £1500 (plus timbers, sheets and wall panels) so hardly worth fiddling through.

 

[Forever Fendt]

i thought the100% tax relief was just for repairs , would guess the replacement would be classed as a new build

Looking at 'repairing' an asbestos (6m x 20m) Nissen hut with a portal frame (6m x 10m) on half of same concrete pad. Kit building frame would be about £1500 (plus timbers, sheets and wall panels) so hardly worth fiddling through.

i can guess whats going to come next