Readers’ forum: Were repair costs capital expenditure?

Our client is resident in Guernsey but has UK property so submits returns in both jurisdictions. The property consists of a block of flats over 11 retail units. The retail units are owned by a non connected company. The lease has a repairing clause which indemnifies the retail units from damage caused by the flats above. Over a period of time water ingress from the flats resulted in serious damage to the units. This only came to light when a health and safety visit forced one of the businesses to close due to a dangerous electrical system caused by the water ingress. The company took action against our client for lost rents and repairs. The eventual settlement cost our client £80 000.

In 2021 Guernsey raised a query in relation to the claim and an explanation and documentation was provided. Guernsey disallowed the expenditure on the basis that it was...