Scrapping of wear and tear allowance ‘bad for tenants’

The scrapping of the 10% wear and tear allowance and replacing it with tax relief on replacement furnishings will have an adverse impact on tenants, ARLA has argued.

It says landlords would be less inclined to buy decent furniture and furnishings in the first place, and that rents will rise.

In its formal response to the Government consultation, ARLA says: “It is important to remember that most landlords are not cash rich.

“Most are heavily leveraged 
through buy-to-let mortgage products. As such, with house prices continuing to rise, net rental yields are only around four per cent for most landlords.

“As the current wear and tear allowance is dependent on the amount of rental income received, we expect to see a rise in rents as landlords try to balance their books and recoup the lost revenue brought about by these changes.”

ARLA says the Government has failed to realise the impact of its proposals on tenants, who would have to spend more of their incomes on rent, in turn reducing the amount they could save towards a deposit “and therefore putting the dream of home-ownership further out of reach”.

Elsewhere in its response, ARLA says that the administrative burden on landlords when the new tax regime kicks in next April should not be underestimated.

ARLA says “significant amounts of evidence” will be required to claim the new relief, and guidance will need to be produced to show landlords what they could and could not claim.

The organisation also points out that the current wear and tear allowance is applied to the initial cost of furnishing a property. “By withdrawing this relief, landlords will be faced with a larger financial burden … and may buy cheaper and less durable furniture and furnishings, knowing they will be able to use the allowance to replace poor quality furniture.”

They would also be unlikely to replace basic goods with something better, which the tenant might prefer.

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2 Comments

  1. mat109

    Rubbish, posturing as usual from ARLA.

    1. Rents are set by the market, not by landlord’s costs. Did rents go down as interests rates fell? I think not.

    2. The 10% allowance applied to furnished properties only and was applied regardless of work actually performed.

    3. Only allowing tax relief where it has actually been spent on something gives landlords an incentive to repair or replace their furniture. Previously they got the relief regardless.

    4. The furniture in most furnished flats I’ve seen is of poor quality anyway.

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  2. Jireh Homes

    Typical response from LL of unfurnished properties, although acknowledge an element of realism and fairness in the proposals.  However the comments in the ALRA report do reflect the views of many LL providing good quality fully furnished properties at a fair market rent (often not more than unfurnished), although missing the potential for greater claim on deposits as LL more likely to be stricter on dilapidations.

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