As part of the Healthy Homes initiative, owners of residential rental properties must now adhere to minimum requirements under the Residential Tenancies Act 1986 for insulation which applies from the 1st July 2019.
While preparing your 2020 annual records, it is a timely reminder to include any information you have regarding the installation of any insulation or heating so we can determine if the expenditure is immediately tax deductible as repairs or has to be added to the cost of the house as an improvement/capital.
In terms of insulation costs, where no insulation was previously installed, new insulation is considered an addition to the cost of the house as it becomes an integral part of the property. However, if the nature of the work involved is only for minor repairs to restore the existing insulation to its original state, so long as the original state meets the current insulation standards, the expenditure is likely to be deductible.
In relation to heating, this is generally considered capital where new heating sources are added to a house. Flued fires are considered a part of the house and as such the cost is to be added to the cost of the house and cannot be depreciated. On the other hand, heat pumps and electric heaters can be capitalised and depreciated at 20% or 67% respectively. However, note that the “small asset thresholds” apply to these capital items and may mean that under certain thresholds a deduction for 100% of the cost is allowed (refer to “small asset threshold” article for more information).
If you have any queries regarding the deductibility of insulation or heating please contact your client manager.