Are lawyer’s fees against builder’s shoddy work chargeable against rental income?
9:40 AM, 19th February 2021, 5 years ago
14
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Are lawyer’s fees chargeable against rental income? I had a firm, supposedly well accredited, called Lethbridge, to do the refurb on my flat in London. The work was rubbish, some not completed, so I didn’t pay for all the work.
They then took me to Court. We won, but I had big legal fees.
Can I charge these against the rental income? My accountant is not sure?
Would be great for some advice.
Rachel
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5th April 2015 Property Valuations for CGT?
Member Since February 2011 - Comments: 3453 - Articles: 286
9:43 AM, 19th February 2021, About 5 years ago
I am not an accountant so don’t quote me but I am thinking this could be a capital expense.
Member Since January 2015 - Comments: 1447 - Articles: 1
11:21 AM, 19th February 2021, About 5 years ago
I would have thought yes as professional fees are an allowable expense.
On a cash basis I would put them as an expense to offset against rental income
Member Since May 2020 - Comments: 17
11:30 AM, 19th February 2021, About 5 years ago
You say you won but lost out on costs, why didn’t the court award you the costs ?
Member Since March 2015 - Comments: 58
11:42 AM, 19th February 2021, About 5 years ago
Reply to the comment left by The Property Man at 19/02/2021 – 11:30
??
Member Since July 2017 - Comments: 462
11:42 AM, 19th February 2021, About 5 years ago
I think it really depends on whether your refurb was going to be put down in your accounts as capital expenditure. IMO the legal expenses associated with expenditure should then also be treated as capital expenditure. The same way when you extend a lease – the lease premium, the landlords legal and valuation costs plus your own legal fees all get added together and added to the original cost of your property.
If however the refurb is minor like replacing worn out kitchen units, replacing damage skirtings and doors your accountant may consider your refurb to be more in the nature of repairs in which case as the refurb is being offset against your current rental income then IMO your associated legal cost should also be offset against you current rental income.
Member Since March 2015 - Comments: 58
11:43 AM, 19th February 2021, About 5 years ago
Reply to the comment left by The Property Man at 19/02/2021 – 11:30
Have you stole my name ? Haha
Member Since February 2021 - Comments: 5
11:49 AM, 19th February 2021, About 5 years ago
Reply to the comment left by The Property Man at 19/02/2021 – 11:30
That’s what I wondered.
Member Since August 2016 - Comments: 508
11:55 AM, 19th February 2021, About 5 years ago
I agree with Judith Wordsworth. Common sense? As a retired solicitor (insurance accident, never L&T!!), I do appreciate the lack of common sense in legal situations!
Has Property Man forgotten that defendants against whom costs are awarded are frequently potless and cannot or won’t pay?
Member Since November 2013 - Comments: 176
11:56 AM, 19th February 2021, About 5 years ago
I have previously had abortive legal fees relating to property issues offset against income tax with no quibble. Your accountant should be expected to know this.
Member Since January 2020 - Comments: 102
12:05 PM, 19th February 2021, About 5 years ago
If you follow through the logic of HMRC PIM2120, it depends if the issue related to capital expenditure or not.