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Taxman disallows cost of ‘white goods’ as an allowable expense for unfurnished properties

First Published: July 2014 | Available in: Property Articles Your Property Network

By specialist property accountant Stephen Fay ACA

Landlords with furnished properties can claim the wear and tear allowance for their properties. Whereas, until 2013, landlords with unfurnished properties can claim a ‘renewals basis’ allowance for ‘moveable items’ such as white goods. However, as of tax year 2014, HMRC have announced that the cost of white goods is no longer a tax deductible expense for unfurnished properties. Specialist property accountant Stephen Fay ACA explains all…


Landlords with furnished properties can claim a ‘wear and tear’ allowance for their properties. Whereas, up to the 2013 tax year, landlords with unfurnished properties claimed a ‘renewals basis’ allowance for ‘moveable items’ such as white goods.

However, this ‘renewals allowance’ was actually an ‘Extra Statutory Concession’ (ESC) by HMRC, and so did not have the force of law – in other words, it was an allowance that HMRC gave, but were not obliged to give. As part of an ongoing effort to ‘tidy up’ the tax system, HMRC have been removing certain ESCs.

In April 2014, HMRC surprised accountants and tax advisers by specifically disallowing ‘moveable’ white goods as a tax-deductible expense for unfurnished properties.

This article summarises the position for furnished and unfurnished properties:

1. Landlords with furnished property – no change

Almost all residential landlords supplying fully-furnished property (i.e. tables, beds, chairs etc) will claim the ‘Wear and Tear Allowance’ –this allows a 10% of (net) rent as an annual deduction against rental profits. This is actually very generous as an allowance – and although the ESC has been withdrawn, the allowance has now been passed into law, hence is still claimable as before (the legislation for tax boffins is: Section 308A-308C ITTOIA).

Note that ‘furnished’ means fully furnished with beds, tables, chairs etc – NOT a token gesture, but genuine full furnishing. During a tax enquiry, HMRC would routinely ask for copies of inventories & tenancy agreements, along with furniture invoices, to check that a wear and tear allowance claim is genuine.

2. Landlords with UN-furnished property – white goods no longer tax deductible

The various tax institutes and bodies (ICAEW, CIOT) asked HMRC to clarify the position regarding unfurnished properties and renewal of white goods, carpets and similar ‘moveable’ items, and a joint Press release was issued on 23 May 2014. Unfortunately, to the great surprise of tax advisers, HMRC have confirmed that there is to be no tax relief for the replacement of free-standing white goods in unfurnished rental properties. And, capital allowances are also not claimable – in effect, there is literally no tax relief whatsoever for such items.

Most tax advisers had expected HMRC to allow such claims under Section 68 of the Income Tax (Trading and Other Income) Act (ITTOIA) 2005 – HMRC have formally ruled this is not an option.

So, what are the options available to landlords with unfurnished property?

1. Provide furnished rental property

This is the simplest way to guarantee a tax deduction for white goods and moveable equipment provided to tenants. A ‘wear and tear’ allowance is claimed on ‘net rents’ (being gross rent less utilities paid on tenants behalf). Of course, whether this makes overall financial sense depends on each landlord property type / location, and tenant type. If your local market doesn’t require fully-furnished property, even with the wear and tear allowance it would be less profitable than simply not furnishing at all, and providing white goods without tax relief. In other words, don’t let the tax tail wag the dog!

2. Don’t provide white goods

How many tenant absolutely demand white goods in a residential property – not many in my experience. Most will regard a fridge / washing machine / dishwasher as ‘nice to have’ – and so it’s not a deal-breaker for them if a property has no white goods. A landlord could even offer a small rent discount for taking a property without white goods and the tenant can use the discount to rent their own appliances.

3. Install built-in white goods

Tax relief is no longer available for free-standing white goods – but is available for white goods built-in to a property. So, when next replacing a kitchen, you could integrate the fridge into a unit, so that it is fixed to the building and so qualifies for tax relief. Similarly, washing machines and dishwashers can be either free-standing (slotting into a gap between kitchen units), or built-in to the kitchen itself. This is a more expensive option than free-standing appliances, but could be worth the extra expense.

4. Rent your white goods

Rental of white goods would be revenue expenditure – not capital expenditure – and so the costs would be allowable.

Or, as a slight twist on this, have your property company (if you have one) buy the white goods, and lease them to you personally. This may be an option for some landlords who have a property company – the company buys the appliances, and rents these at a commercial rate to the personally-held portfolio. The company then claims the Annual Investment Allowance on the white goods assets, to obtain tax relief. The company would have a second ‘leasing’ trade – but beware of the impact on any tax losses, and that the level of rental activity would need to be commensurate with a genuine trade (seek specialist tax advice)

What about carpets – are they affected?

Carpets are also, in principle, affected by the HMRC ruling. The theory is that carpets are capital in nature, and so neither capital allowances can be claimed, nor is the expense treated as revenue expenditure.

However, if the carpets can be argued to be revenue expenditure, then the cost becomes allowable. This would mean that either the carpets are repaired (rather than replaced), or that the carpets are replaced with a similar type / value carpet, such that there is no’ improvement’ i.e. it is like for like replacement. Regular replacement with cheaper carpets – rather than less frequent replacement with expensive carpets – is likely to increase the chances of HMRC accepting such a claim. Whether HMRC would seek formally to challenge the claiming of carpets as an expense, in practice, remains to be seen, although a good accountant would make a convincing case bearing in mind the above.

Does this affect normal repairs to my properties?

Absolutely not – the rules around repairs to the fixtures in a property are unchanged. Crudely, ‘fixtures’ are part of the structure of the property e.g. a kitchen is screwed into the actual walls of the property, as is a bath, sink, boiler & radiators etc – none of these are ‘moveable items’.


For landlords providing unfurnished properties, the renewal of white goods is no longer an allowable expense, for tax year 2014 and beyond. However, landlords can consider the hints and tips given in this article to ensure tax relief is available in some shape or form for the provision of white goods to tenants, as well as carpets and floor coverings.

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