If you purchase or refurbish a business property it has long been an issue that one needs to consider how much of the expenditure is a repair (then deductible from the relevant income) as opposed to an improvement (then treated as capital expenditure).

Often we are able to negotiate a proper apportionment of the expenditure as between the two heads, but sometimes it proves very difficult. It should now be easier, however, following a recent Tax Tribunal case where it was held that expenditure on a let property was, in the particular circumstances, wholly of a repair nature. All the expenditure was therefore deductible against the rent.

This decision could well be appealed against, but interestingly the Tribunal effectively warned off HMRC trying to appeal as it said that as far as they were concerned the decision was supported by what HMRC has to say about the repair vs improvement issue in their property income manual.

We will take this important case into account when determining whether there should be full tax relief in the future.