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Posted Sat, 26 Jun 2021 15:57:31 GMT by Mauree n Treadwell
I recently sold a buy to let HMO. When I originally bought the property I was informed by HMRC that expenditure PRIOR to the first contract being signed would have to be claimed at CGT stage when the property is sold. Subsequent replacements of the white goods/furnishings could, however, be claimed as normal expenditure but not the original purchase. I duly saved all the receipts for the white goods, carpeting, etc etc. for over fifteen years but I have now I have come to sell, I have been told that these do not count as improvements and cannot be counted against CGT. The latter is a bit annoying because a fully equipped HMO with all white goods and furnishings will fetch more than an empty one so I have increased the price (and hence the CGT) but apparently can't claim for the original expense. This seems to fall foul of the 'wholly and exclusively' tenet of business profit taxation. They seem to be non deductable both from CGT and normal income tax. So I'm puzzled? Can you help? Thank you!
Posted Mon, 28 Jun 2021 12:03:35 GMT by HMRC Admin 9
Hi, 
 
Pre-rental expenses of a revenue nature can be deducted as an expense against profits made once the property is rented, and income has been received.  Details of this can be found here:

PIM2505 - Beginning and end of a rental business

There are two types of expense usually incurred. Any expenses of a revenue nature can be claimed against rental income and any expenses of a capital nature can be claimed against any future Capital Gain. Guidance and examples on which type the expense comes under can be found here:

PIM2030 - Deductions: repairs: is it capital?

Additional guidance on capital expenditure can be found here: 

Capital Gains Manual

Thank you. 
 
Posted Mon, 28 Jun 2021 13:27:57 GMT by Mauree n Treadwell
Thank you!

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