Hotel replacements

26 November 2008

Issue: 4186 / Categories: Forum & Feedback

What is the basis for the tax relief on repairs and replacements in an hotel? Can relief be claimed on a replacements basis or should the expenditure be capitalised and capital allowances claimed? The replies consider the difference between repair and replacement of assets and whether these would be 'plant'.

My client runs a successful 40-bedroom hotel which includes a bar and restaurant area. She strives meticulously to keep the hotel in good order and consequently has a substantial charge for repairs and replacements in each year.

The records for the year (ending before 31 March 2008 and therefore prior to the annual investment allowance) have been reviewed by HMRC who argue that replacement carpeting beds and mini-freezers and refrigerators should be capitalised. They have suggested that the replacement basis can be used only when the terms in 'BIM 46935 — specific deductions; repairs and renewals; renewals basis' are satisfied. This appears only to apply where no initial claim was made in terms of capital allowances and no relief of the expenditure in the profit and loss account was claimed for the initial cost of the asset prior to being replaced.

Whilst it seems unreasonable for these...

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