Repairs refers to restoring an asset by renewal or replacing the parts of the whole. Expense from repairs are deductible.
Renewal refers to reconstructing an asset to a substantial amount.
Inland Revenue’s policy on repairs and maintenance include:
Notional repairs are not deductible. Notional repairs refer to the cost of repair that would have costed the taxpayer if they have decided to repair not just replace the asset.
If the asset is a substantial unit that can function on its own, it is considered individual and expenditure on that particular unit will be measured. Common examples of asset that is considered individual are buildings that are attached to larger complex, motor vehicles, and boat builder’s slipway.
Revenue or Capital?
Questions to ask oneself when deciding whether the expense is capital or revenue:
Consider all questions.
For capital expenditures deductions are not allowed by can be depreciated.
Repairs and maintenance to ancillary plant:
Expenditure is deductible when it is:
Expenditure is capital and not deductible when it is:
Repairs and maintenance for rental investments
Property owners must be aware that: