Not all monies spent on the property are an allowable expense (revenue). Some items are in fact capital. If it is a revenue expense the monies spent are set against any income received. If it is a capital expense the monies spent are deducted in order to calculate if there is any profit which may be subject to capital gains tax.

Difficulties can arise when trying to determine what is a capital or a revenue expense. Capital expenses tend to be the big items – maybe a conservatory or an extension. These items tend to add value or be an improvement to the property rather than be an expense in order to generate income. Yes the additional space may mean that you can charge more rent but the money spent cannot be set against the rents you charge. However, changing single glazed windows with double glazed windows is not a capital expense and can be set against any income received.

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