Are my rental expenses from the LAST tax year allowable in THIS year’s return?

Are my rental expenses from the LAST tax year allowable in THIS year’s return?

14:16 PM, 9th November 2020, About A year ago 20

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We moved out of our home on 1st February 2019. Since December 2018, we had advertised the property to let from 1st Jan 2019, and put everything in place to satisfy our mortgage lender’s demands (landlord insurance etc) when we applied for ‘permission to let’ in early December. Our interest rate was increased by 1% by the lender from 1st January (the date from which they granted ‘permission to let’) but the first tenant did not move in until 1st April 2019.

Between 1st Feb and 1st April we incurred costs associated with the property (mortgage interest payments, council tax, water rates, landlord insurance, minor repairs etc.) but did not receive any rental income until 1st April 2019.

My question is: can the expenses we incurred between Feb and April 2019 be offset against the rental income we received in 2019-20, or should I have declared them as a ‘loss’ on last year’s tax return?

I would be very grateful for any advice fellow landlords (or tax experts!) can offer.

Many thanks.

Janie



Comments

by Paul Shears

18:58 PM, 10th November 2020, About A year ago

Reply to the comment left by David at 10/11/2020 - 09:36
Correct.

by Gunga Din

19:14 PM, 10th November 2020, About A year ago

And setting aside the capital vs repair aspect, expenses going back 5 (or 6?) years can be entered in a tax return.

by David

12:50 PM, 11th November 2020, About A year ago

Janie mentions mortgage interest payments, council tax, water rates, landlord insurance etc. Surely these can't be considered capital expenses.

by Neil Patterson

13:15 PM, 11th November 2020, About A year ago

It's best to use a good accountant as they will nearly always save you at least as much as they cost and you should only act upon your qualified accountant's advice as it will be insured and hence you are covered if any inadvertent mistakes are made.

by Olls63

14:37 PM, 11th November 2020, About A year ago

Reply to the comment left by David at 11/11/2020 - 12:50
No they are not
What is capital is any expense on the property needed to make it suitable to be let.

by Puzzler

14:59 PM, 13th November 2020, About A year ago

The expenses you refer to are not capital. That would be things like a new kitchen.

If you had bought the house for letting then you would be able to claim but as it was your home you can't:

Allowable revenue expenditure incurred before the rental business begins can be relieved under the ICTA88/S401 or ITTOIA05/S57, provisions for pre-trading expenditure. Relief is only due if the expenditure:

is incurred wholly and exclusively for the purposes of the rental business
is not capital expenditure
is incurred within a period of seven years before the date the rental business is started, and
is not otherwise allowable as a deduction for tax purposes, and
would have been allowed as a deduction if it had been incurred after the rental business started.
Thus, for example, council tax on a property could be allowable under the above rules if it is due before the property is first let, provided the property was acquired solely for the purposes of the rental business. However, the relief is not allowable if the council tax was paid on the taxpayer’s own private residence before the property was let (as it would be the taxpayer’s own expense).

by Paul Shears

16:58 PM, 13th November 2020, About A year ago

Reply to the comment left by Puzzler at 13/11/2020 - 14:59
Succinct & spot on. Plus you have taught me something. 🙂
I had not realised that I should have claimed the council tax.
Thanks very much for your input. 🙂

by jonney

14:04 PM, 14th November 2020, About A year ago

Neil's advice is ask a good accountant - Mark A is not an accountant!
Like many say those costs are NOT capital costs but normal pre trading costs that can be expensed. You could create a loss in the first non trading period and carry that forward but really no point so just expense them.

by Jireh Homes

18:43 PM, 18th November 2020, About A year ago

Reply to the comment left by Chris Harris at 10/11/2020 - 10:43
Whilst correct that tax year is 6th Apr to 5th April, it is acceptable to use 01 Apr - 30 Mar, so long as consistent each year.

by user_ 7167

22:49 PM, 18th November 2020, About A year ago

Obfuscated Data

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