Enhancement Expenses

In April 2015, I and my 2 sisters were 'gifted ' by my mother her bungalow. She has continued to live there for a peppercorn rent until Feb 2023 when she moved into a care home. We have therefore decided to sell the property. It was on the market for six months with little interest shown partly due to the amount of work that needed doing . We therefore decided to undertake some of the essential work to improve our chances of a sale, or if necessary to let it out. This work included A new central heating system approx ; a gas safety inspection and certification.£6000 Rewiring throughout and new circuit board. An EICR inspection and certification. Approx £1600 A stud wall built to split one large room and thus create a third bedroom. Painting and decorating to make good from all the above work approx £3000 No sooner had we finished the work than we had an offer made on the property. We are therefore asking which of the above costs can be included as Enhancement expenses when we calculate the GGT?

Hi ,
 

From the list you provide, only the expenditure for creating the extra bedroom would be allowable to set against the capital gains, for examply, the partition wall, re-wiring the new bedroom, painting and decorating the new bedroom.  Re-wring and painting and decorating for the remainder of the house would not be allowable. Re-wiring, painting and decorating and new heating systems are all considered repairs and maintenance, s o do not qualify.  Please have a look at : Capital Gains Manual for more guidance on expenditure  . Thank you .

Thank you for this information, but just to clarify, we had to replace the old boiler, which was a back boiler and impossible to replace like for like, with a new condensing boiler, and also change the radiators as they were very coked up. We were unable to sell the property without doing this work . We had the bungalow on the market for 6 months with no serious offers made. See CG 15183; Lord Emslie commented ;' WHAT SECTION B IS LOOKING FOR IS, AS A RESULT OF RELEVANT EXPENDITURE, AN IDENTIFIABLE CHANGE FOR THE BETTER IN THE STATE OR NATURE OF THE ASSET AND THIS MUST BE A CHANGE DISTINCT FROM THE ENHANCEMENT OF VALUE." Before the boiler installation, the heating did not work safely and adequately and deterred buyers from purchasing the property. We decided to have the work done to make the property saleable.

Hi Sapphire18,
As you meet the conditions at:
CG15180 - Expenditure: enhancement expenditure
Yes, these are allowable.
Thank you.