The difference between the replacement of domestic items relief and wear and tear relief.
The replacement of domestic items relief was introduced as a replacement to the previous legislation known as
wear and tear relief. The critical difference between the old Wear and tear relief and the new replacement of domestic items relief is that the older system was only available for furnished lettings. The new legislation is not as restrictive as the prior relief, with the further relief available for all properties.
The amount of the deduction is based on:
- the cost of the new replacement item, limited to the price of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent); plus
- the incidental costs of disposing of the old item or acquiring the replacement; and
- less any amounts received on disposal of the old item.
The Difference between Replacement and Improvement
There is an essential distinction between deciding whether or not a new item
represents a replacement or an improvement. Where the new thing is an improvement on the old item, the allowable deduction is limited to the cost of purchasing an equivalent of the original article.
HMRC’s internal guidance provides an example highlighting that a brand new budget washing machine costing circa £200 is not an improvement over a five-year-old washing machine that costs around £200 at the time of purchase (or slightly less considering inflation).
However, suppose a replacement item is for a reasonable modern equivalent, such as a new energy-efficient fridge replacing an old one. In that case, this is not considered an improvement, and the total cost of the new item is eligible for replacement of domestic items relief.
Items that the replacement of domestic items relief covers
The items that the replacement of domestic items relief covers are as follows
- Movable furniture such as Beds, sofas, wardrobes, chests of drawers, tables
- Furnishings including linens, carpet, rugs, cushions, floor coverings
- Appliances: fridges, washing machines, televisions,
- Kitchenware, plates, bowls, glasses, cutlery
Contact us
Suppose you’re a landlord and in the process of having replaced items in your rented property. Contact a member of our
tax team who will help you calculate your relief for the replacements made.