Resurfacing: Repairs Or Capital?

Any business owner whose property includes a road, driveway, or parking area, will have to repair those surfaces at some point.

The question is whether to charge the costs to ‘repairs’ or to ‘capital improvements’ in the accounts. 

This decision has significant tax consequences, as the cost of repairs will qualify for a tax deduction, but capital improvements will not. Capital expenditure on improvements or renewals doesn’t get a tax deduction until the property is sold. Capital allowances can’t be claimed for the cost of laying roads or the structure of buildings, except in rare cases where the facility is used for research and development.

Tax Inspectors frequently challenge the cost of repairs in business accounts, particularly where the sum expended in one year is large. The Inspector may argue that where a road is resurfaced, the work should be treated as a renewal (capital) and not a repair.

However, following a number of tax cases on this issue HMRC has changed its official guidance to its Tax Inspectors.

The new guidance states that where a road has been resurfaced, that amounts to a repair and not a renewal or a replacement, so the cost is tax allowable.

There are still many grey areas which can be argued to be one side of the capital/repairs line or the other. If you need a second opinion on the tax deductibility of your property expenses, please do ask us.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

News / Blog

21st
September

4 Step Guide to Setting up a Limited Company

Most of the Stockport Business Owners we work with choose to begin trading as either a sole trader, through an…

13th
September

Small business owners – should you lease or buy a company car? Could there be any tax advantages?

Should you buy a car or lease a car for your company? It’s a question we are regularly asked by…

5th
September

Business rates ‘staircase tax’ heaps yet more pressure on the UK’s small businesses claim critics

Just when you thought the new business rate system couldn’t get any worse for UK SMEs, it now appears that…

1st
September

Double glazing salesmen was self-employed

Employment status tax cases often make the headlines in the professional press and the June 2017 case of Tomlinson was…