"Tax wise, most landlords letting furnished property have a choice. They can either opt to deduct 10% of the net rents as an annual wear and tear allowance or they can choose to wait for years until the item needs to be replaced to claim the alternative renewals deduction. Unsurprisingly, most go for the wear and tear allowance.
"What many landlords don’t realise (because it is not made clear in the Tax Return notes) is that the 10% deduction is given to cover the sort of assets that a tenant or owner-occupier would normally provide in unfurnished accommodation such as living room suites, fridges, cookers and washing machines.
"Non moveable items like boilers don’t seem to count under this definition and so a landlord letting furnished property and claiming the 10% wear and tear deduction could replace an old boiler with a modern new efficient one and still claim the cost as a valid expense.
"But even here, the current rules are unclear because HMRC will not allow a deduction for the replacement of fixtures that constitute an improvement."
Helen Demuth, a tax expert at Smith & Williamson said: "HMRC did not used to allow a deduction for double glazed windows since they were an improvement on single glazed windows. They now allow double glazing as a deduction."
Lawrenson said: "On the same basis, condensing boilers are an improvement, and like thermal insulation requirements for most windows, they are mandatory. It would be helpful if HMRC could confirm that the costs are deductible.
"The current confusion means that when a landlord is faced with the cost of replacing an old boiler, he is more likely to try to keep it going than to replace it, especially as repair costs can also be claimed as a valid running cost. This is bad for the environment and bad for the UK’s carbon footprint.
"It would be useful if HMRC could announce that they will always allow condensing boilers as a deduction when replacing existing boilers. Also, condensing boilers should be included in the Energy Allowance (see note 4) where the property has not had central heating before."
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