BIM46903 - Specific deductions: repairs & renewals: what is a repair: the ’entirety’

The cost of repairing a worn or dilapidated asset is normally an allowable expense.

It is important to identify what is the asset that the work has been carried out on.

Replacing the whole asset is not a repair

If the taxpayer replaces the asset, that is capital expenditure and not an allowable expense.

For example:

• Fred has a garage in which he stores his taxi. If Fred decides not to spend money on the garage and has it knocked down and a new garage built, then that is not a repair, it is a replacement.

It does not matter whether the taxpayer chose to replace the asset, or was forced to, for instance because the building burnt down. The cost is capital expenditure and the whole cost is not an allowable expense.

The question of what is the asset, the ’entirety' as it is referred to, is one of fact and degree and a close study of the facts may be needed. For more detailed information on what is the whole of the asset or the ’entirety’, see the judgement of Vinelott J in Brown v Burnley Football and Athletic Club Ltd [1980] 53TC357 at p363 and the guidance at BIM35330.

Other forms of relief

Depending on the facts, the taxpayer may be able to obtain relief for capital expenditure on the replacement of the whole asset in the following ways:

• capital allowances; these are available on some but not all assets; for example, expenditure on industrial buildings, agricultural buildings, machinery or plant generally,
• renewals basis for machinery and plant assets, but there is no relief for the cost of the first item or for improvements (see BIM46935), or
• valuation basis for utensils etc (see BIM46940).

Some capital expenditure gets no tax relief at all. For example, expenditure on replacing commercial property such as offices and shops.