PIM2040 - Deductions: repairs: other rules

Provisions for repairs to premises

A customer can deduct expenditure on repairs where the liability to pay for the work is incurred during the tax year but payment has not been made by 5 April. But a provision for repairs to premises that they propose to incur in the future is not deductible. For example, they can’t claim a deduction for repair work they think will need doing next year but which they have not yet incurred any liability to pay.

Repairs to assets on which capital allowances were claimed

The customer’s right to a repairs deduction is not lost because they had, or are getting, capital allowances on the asset as a whole.

For example, suppose the customer replaces a chimney that is a physical part of a factory building. This is usually a revenue expense where the new chimney is a repair to the factory, there is no improvement, and the factory was not bought in a dilapidated state. If it is a repair, the customer can deduct the cost even though industrial buildings allowance was due on the cost of constructing the factory.

Grants received

Generally any grants the customer gets towards, say, the cost of revenue expenditure on repairs must be included in their rental business profits. Grants towards capital expenditure must similarly be deducted in arriving at the expenditure that qualifies for capital allowances.

Timing of deduction

The normal trading income rules apply. For further guidance see BIM46901.

Repairs covered by insurance

The landlord may have an insurance policy that covers the cost of some repairs. If so, you should allow as a deduction only the excess of the cost over the amount of the insurance recovery. Sometimes this is achieved in accounts by deducting the expense when it is incurred, and crediting the insurance recovery as a receipt when it is received. You may accept this approach. (We adopt similar principles for traders, see BIM40755.)

Tenants’ contributions to maintenance costs

Section 207(2) of the Corporation Tax Act 2009 and section 266(2) of the Income Tax (Trading and Other Income) Act 2005 provide that ‘rents’ includes payments by the tenant for work to maintain or repair leased premises which the lease does not require the tenant to carry out.

Where a tenant is required to make such contribution, therefore, the amounts received by the landlord are taxable in full. The cost of repairs is allowable in full. It is incorrect to set one off against the other, and the correct treatment may produce a different result (as the repairs expenditure may well be incurred in a later chargeable period).

Where the tenant’s contributions are paid into a trust fund, see PIM1075.


The landlord of a property let on a tenants repairing lease usually inspects the property before the lease is due to expire and may send the tenant a list of repairs which should have been carried out under the terms of the lease but which have not, in fact, been done. Instead of doing the repairs, the tenant may make a payment to the landlord.

  • Where the landlord then disposes of the property or occupies it himself, the payment is likely to be treated as a capital receipt by way of compensation for failing to observe the terms of the lease as a result of which the property reverted to the landlord in a dilapidated condition. The sum paid to the landlord may then be chargeable, in the landlord’s hands, to CGT.
  • Otherwise, the payment is likely to have the effect of filling a hole in the landlord’s profits (i.e. compensation for the lower rent the property can now command) and the payment should be treated as a receipt of the rental business. The Privy Council case in 1976 of Raja’s Commercial College v Gian Singh supports the view that, for a rental business, it is appropriate to treat such receipts as taxable because they plug a hole in the landlord’s income as opposed to the landlord’s capital.

Alternatively, the tenant may pay a sum towards the cost to the landlord of carrying out the repairs required. In that case, the landlord should only get a deduction for the net cost they bear.