What is a business repair?

HMRC’s internal manuals provide some useful information on the definition of a business repair. This is important because it is required to identify the asset on which work has been carried out.

This is because:

  • the cost of repairing a worn or dilapidated asset is normally an allowable expense;
  • the cost of replacing the whole or the ‘entirety’ of an asset is not a repair; it is capital expenditure and not an allowable expense.

HMRC’s guidance goes on to explain that what forms the asset or entirety is a question of fact. It is important to ascertain whether the ‘asset’ is in fact a separate asset or is part of a bigger asset.

The basic starting point is to establish the facts about the specific asset you are considering and then to ask the question; does this look like a separate asset? Is it something that stands apart from other assets, is it freestanding or is it something that is removable? This is a question of fact and degree; there are no ‘tests’ that can be applied.

With buildings and structures, the question is whether the item replaced appears to be a free-standing asset. The fact that it is connected to another structure, for example by a flue, does not make it part of that larger asset.

It also needs to be considered whether something has become part of something else. If something is a ‘fixture’ then it has become part of the building and not an entirety in its own right. 

Source:HM Revenue & Customs | 06-11-2023


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Haroon Muhammad

Haroon Muhammad boasts 17 years of comprehensive experience in tax, financial services, and local government. His sheer love for tax drives his mission to save clients money and optimise their financial strategies. Haroon is dedicated to navigating complex financial landscapes with precision and delivering exceptional results for his clients.