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Q. One of my let properties required extensive repairs to cure a damp problem. The tenant was on an assured tenancy so we reached an agreement under which I paid her to vacate the property to allow the repairs to be carried out. The flat was relet after the repairs were completed. Is the payment to the tenant treated as capital or a revenue expense?
A. Your payment to the tenant to surrender her tenancy will be treated as a capital payment if it is reflected in the state or nature of the property at the date of disposal. However, as you relet the property (presumably on similar terms) the surrender of the tenancy is not reflected in the value of the property, so it cannot be treated as a capital cost. It is also not a revenue expense, so it ends up being a 'tax nothing', not deductible for tax at all.
The information provided in this blog is for general informational purposes only and should not be considered professional advice. As far as we are aware, the content is accurate at time of publication. Torgersens assumes no responsibility for errors or omissions in the content or for any actions taken based on the information provided.
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