Suppose you have a rental property and replace the carpet. Is the cost repairs or is it a new asset? Do the same rules apply to lino?
Determining how to treat some expenditure, particularly in relation to property, can be complex. The best thing to do is to provide us with full information about what you have done.
Some expenditure on property can be the creation of a new asset while other can be repairs or maintenance.
When considering repairs, Inland Revenue tells us to look at the asset. For example, if you buy some lino, you have to stick it to the floor of the house so it becomes part of the house. Therefore, if you replace the lino, the cost is fully tax deductible, because it is repairs to part of the house.
Carpet can be an asset in its own right, because it doesn’t get stuck to the floor and could be pulled up and sold. Therefore, carpets could be either a separate asset and valued at the time you buy the house or it might have been ignored and therefore would form part of the house. If it has been treated as a separate asset and you replace it, you write off the old carpet and you depreciate the new carpet. If it has been treated as part of the house replacing it becomes repairs and is therefore fully tax deductible.
