HMRC have confirmed that they have got it wrong.
This is a huge rarity: I have never known them to make such a sweeping statement.
In previous years, HMRC informed landlords that if they changed a boiler in their rental property, or upgraded a boiler to a more environmentally friendly one, this is treated as a capital item and not as a repair or replacement. This meant that it had to be added to the cost of the property, and relief would be given when the property is sold: the cost of the item could not be offset against rental income, therefore reducing the taxable profit and reducing the tax payable.
However, HMRC recently issued a letter to many landlords informing them that they got it WRONG.
They have now confirmed that the replacement of a boiler, whether as a repair or a replacement to a more environmentally friendly one, is actually a tax-deductible cost and not a capital item.
Therefore, if you have incurred the cost of a boiler (or similar items) that were not treated as a tax-deductible item against your rental profits, you can now amend your tax return and claim this cost. HMRC have confirmed that the cost can be treated as an expense and you are able to go back to your previous two years, for the 2022 and 2023 tax returns.
It is advisable to see if you should amend these returns, as a refund of tax will be made to you if you have overpaid tax.
This may also have affected the amount of child benefit you had to pay back, or any student loan repayments, as well as which tax band you may have fallen into.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the Contact Us page on our website.
Chantal Baker is the director and founder of Champ Consultants Ltd, an accountancy and tax consultancy practice in Caterham. Please follow us on our various social media channels.
You can also follow her on TikTok and read her previous columns here.
