The curtain has come down on the Green Deal – so where does this leave landlords who must spend on the properties to bring them up to at least the minimum standards for letting under new rules that take effect in April 2018.
By that time, every buy to let home must score at least an E banding on an energy performance certificate (EPC) or the landlord is not allowed to let out the property.
The intention was that the government would help with this spending with the Landlord Energy Saving Allowance (LESA) and the Green Deal, but now ministers have pulled them both, what are the tax implications on spending cash on energy improvements for landlords?
The good news is all the expenses are still offset against tax – it’s just the timing that has changed for most.
Any repairs, like replacing a boiler or heating system are claimed as day-to-day business expenses and offset against rental profits in the tax year the money was spent.
The same goes for ripping out old windows and replacing doors with double glazing.
However, other energy conserving projects, such as cavity wall insulation, adding loft insulation or installing heating where there was none now become improvements with the cost offset against capital gains tax on disposal of the property.
The old LESA was attractive to landlords as from a tax standpoint; the rules converted capital spending into same-year tax relief as day-to-day business spending.
The Green Deal also switched the responsibility of paying for any work away from the landlord to the tenants who would benefit from the energy efficiency improvements.
“We’ve seen many success stories come out of Green Deal, but uptake has been lower than expected,” said a government spokesman.
“By the end of May 2015 there were nearly 15,600 Green Deal finance plans in progress, as well as over 27,000 energy efficiency measures installed in homes across England and Wales thanks to the Green Deal Home Improvement Fund. The total value of measures installed under the Home Improvement Fund is £114 million.
“But now it’s time for the building industry and consumer groups to work with us to make new value-for-money approach.”
The spokesman went on to explain the Green Deal is withdrawn from September 2015 because of low take up and concerns about building industry standards.