Can I claim for expenses paid in advance?
I would be grateful for any advice you can give me. My husband and I own a small property portfolio jointly 50/50. I am employed, but he is not.
My rental income plus earned income puts me into the higher rate tax bracket. We had very low expenses this year and consequently we are facing a very large tax bill.
Thanks to a consultation with Mark we will apportion the beneficial interest in the properties 70/30. However I would like to reduce the tax bill for the 17/18 tax year.
My question is can we pay expenses in advance e.g. Utility bills? Obviously we would not claim these next year, but our situation will have eased with the change to beneficial ownership.
Many Thanks.
Marlena
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Member Since September 2016 - Comments: 2533 - Articles: 73
6:02 PM, 29th March 2018, About 8 years ago
No idea, but I can’t see the utility companies turning you down.
Member Since January 2011 - Comments: 12193 - Articles: 1395
8:49 PM, 29th March 2018, About 8 years ago
Hi Marlena
Sorry but prepayments are not allowable expenses.
Member Since July 2016 - Comments: 166
9:00 PM, 29th March 2018, About 8 years ago
Thank you Mark.
Member Since October 2017 - Comments: 101
9:13 AM, 30th March 2018, About 8 years ago
I thought that landlords are now taxed on the Cash Basis unless you opt out to use the Accural Basis? (Unless rental income exceeds £150k). This means there would be no accruals or prepayments and expenses are accounted for when they are actually paid, not necessarily in the period that they cover. I’m not an accountant but this was my understanding. Please can someone clarify?
Member Since January 2011 - Comments: 12193 - Articles: 1395
9:29 AM, 30th March 2018, About 8 years ago
Reply to the comment left by Cathie Hawkins at 30/03/2018 – 09:13
To an extent you are right, however, there would be no invoice to support the payment, hence it is still a pre-payment on account. The flip-side of this is that you receive tenants deposits but they are not treated as income for tax purposes.
Member Since July 2013 - Comments: 1434
11:13 PM, 30th March 2018, About 8 years ago
It sounds to me that what is being suggested would be considered tax evasion.