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This might sound silly but I have to be certain.
Is renovation a capital or revenue expenditure for capital gains tax purposes?
Because in BPP Revision Kit FA 2016 Q91 (c), it is deducted from sales proceeds to calculate the chargeable gains in respect of the disposal of a house.
It is mentioned in the question that “Simon purchased a derelict freehold house”. Does this imply that the house was unusable? In that case, any repairs/renovation would be treated as capital expenditure.
Shouldn’t the exam questions explicitly mention the house is not usable?
For CGT it is simply a question of whether it is improvement expenditure. The fact that the house was derelict when purchased would tell you that renovations represented improvement expenditure.
The issue about “usable” is when looking at expenditure that should be treated as capital for purposes of capital allowances.Thank you. I pretty much knew that. I wanted to be certain because the question didn’t explicitly say the house was unusable. I tend to read through the questions really quickly (looking for figures and useful info) so it took me a while to realize the question described the house as “derelict”.
I don’t understand the last paragraph. I haven’t come across any question testing capital allowances that tests our knowledge of “usable” as well. So are you saying renovations that count as improvements qualify for capital allowances?
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