BIM46900 - Specific deductions: repairs & renewals: contents

Introduction

For the purposes of this chapter, ’repair' means the restoration of an asset by replacing subsidiary parts of the whole. No significant improvement of the asset beyond its original condition can result or there will no longer be a repair.

The cost of a repair is normally revenue expenditure but the cost of replacing the asset or of making a significant improvement to the asset as a whole will be capital expenditure ( BIM46903).

The cost of a repair may be capital expenditure and not allowable as a deduction where the asset has just been acquired, see BIM46906 for further information.

It is worth taking care with the terms used; some people, for example, use ’renewal' to mean either a complete replacement of an ’entirety' or a replacement of, or repair to, an ’entirety'.

Sometimes more than one basis for relief may be available for expenditure; for example, machinery and plant capital allowances and the renewals basis. The general principle is that relief is only due once for expenditure on an asset.

This chapter contains the following:

More detailed discussions on the tax cases from which the principles are drawn and some related topics can be found as follows:

• Tax cases on meaning of ‘entirety’ BIM35330.
• Asset bought in a defective condition, border between capital expenditure and repairs BIM35450.
• Tax cases on assets bought in a defective condition BIM35455.
• Tax cases on repairs to old building where techniques have changed over the years BIM35460.
• Tax cases on enlarging and/or altering a building BIM35465.
• Tax case where the solution to a maintenance problem involved capital expenditure (Auckland Gas Co Ltd v CIR [2000] 73TC266) BIM35470.
• Treatment of expenditure by fruit farmers on the planting/replanting of orchards BIM55275.