She continues: “The consultations have made it clear that landlords are going to be made to pay for the improvements required. They set out proposals to ban the letting of industrial and commercial buildings which do not have an Energy Performance Certificate of B or above from April 2030 and the letting of homes which do not have an Energy Performance Certificate of C or above from April 2025. The current threshold for all properties is a certification of E.”
Companies can claim a ‘super deduction’ for plant and machinery of 130 per cent of the price paid up to March 31 next year, 2023. There is no limit on the amount that can be claimed, and the deduction is applied against the rental profits for the year – significantly reducing the corporation tax payable on the profits for the year in which the plant is acquired.
The relief for partnerships and individuals is not as generous, but they can claim for plant purchased via the ‘Annual Investment Allowance,’ which gives tax deduction of up to £1m a year. The £1,000,000 allowance is available up to March 31 2023; thereafter it falls to £200,000.
Powell concludes: “Expenditure that does not qualify for these ‘capital allowances may qualify as a repair, and thus as a deduction against profits for all landlords. Unfortunately, there is no clarity on this point in the tax legislation.
“As the requirement to undertake the works is being imposed by the government, it would appear to me to be reasonable for the passing of the Energy performance Certificate, legislation to be introduced at the same time as confirmation from the Treasury that a full tax deduction will be available to all landlords for the costs incurred of improving the EPC status of their property. This would incentivise all landlords to undertake the works and would be a win-win for everyone.”