The renewals allowance under s68 ITTOIA 2005 and s68 CT 2009 has historically allowed a deduction for the costs incurred in replacing and alternation of tools used in a trade or business where the expenditure would otherwise be considered to be capital. According to HMRC, the renewals allowance was only intended to be used for small items such as glasses and cutlery. However, following the removal of ESC B47 in April 2013, landlords of unfurnished properties in particular were increasingly turning to this allowance to claim relief for replacement capital costs such as freestanding fridges that they provided.
With the abolition of Wear and Tear allowance for furnished properties and the creation of the new replacement relief for expenditure after April 2016, which allows relief for landlords of both furnished and unfurnished properties, in respect of replacement furnishings within rental properties, it is considered that the renewals allowance is no longer required. Accordingly, the renewals allowance will be repealed for expenditure incurred on or after 6 April 2016 for income tax purposes and from 1 April 2016 for corporation tax purposes.
The repeal is unlikely to have a significant impact on businesses as there are now other provisions such as capital allowances and the new replacement relief for property landlords, which will allow businesses to claim a deduction for the capital costs that were previously claimed under the renewal allowance.