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HMRC internal manual

Property Income Manual

From
HM Revenue & Customs
Updated
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Furnished lettings: Wear & tear allowance -2011/12 onwards

ITTOIA/S308A, CTA09/S248A

This legislation applies to 2011/12 onwards for income tax payers and for accounting periods commencing on or after 1 April 2011 for corporation tax payers.

Taxpayers can elect to deduct a wear and tear allowance as an expense of their property business.

This election means that instead of claiming relief for replacing utensils, or repairing furniture, the taxpayers deduct an allowance calculated as a percentage of rents received.

The option to elect for a wear and tear allowance is only available for lettings of furnished dwelling houses.

The term “dwelling house” takes its everyday meaning which is set out in the Capital allowances manual at CA11520.

To qualify as a furnished residential letting the property has to be a dwelling house that is let with sufficient furniture, furnishings and equipment for normal residential use.

Sub-let

Where a furnished dwelling house is sublet, only one landlord in the chain can claim the wear and tear allowance. This is the first landlord in the chain who is eligible to claim the relief.

Example:

A lets a property to B, complete with fully fitted kitchen, carpets and curtains. In turn B installs sufficient beds, chairs, tables and other equipment to allow normal residential use and lets the property as student accommodation.

B can make a wear and tear allowance election as A did not let the property with sufficient furnishings so as to allow “normal residential use”.

Example:

C lets a property to D. The property is let complete with furniture and equipment. In turn D sublets the property to an employee who can simply move in as there are sufficient beds, chairs, tables and other equipment to allow normal residential use.

D cannot make a wear and tear allowance election as C let the property to D complete with sufficient furnishings so as to allow “normal residential use”.

Guidance on how the allowance is calculated can be found at PIM3210.

Guidance making a claim for the allowance can be found at PIM3215.