Can I claim for expenses paid in advance?

by Readers Question

16:36 PM, 29th March 2018
About 9 months ago

Can I claim for expenses paid in advance?

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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



Comments

Dr Rosalind Beck

18:02 PM, 29th March 2018
About 9 months ago

No idea, but I can't see the utility companies turning you down.

Mark Alexander

20:49 PM, 29th March 2018
About 9 months ago

Hi Marlena

Sorry but prepayments are not allowable expenses.

Marlena Topple

21:00 PM, 29th March 2018
About 9 months ago

Thank you Mark.

Cathie Hawkins

9:13 AM, 30th March 2018
About 8 months 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?

Mark Alexander

9:29 AM, 30th March 2018
About 8 months 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.

Michael Barnes

23:13 PM, 30th March 2018
About 8 months ago

It sounds to me that what is being suggested would be considered tax evasion.


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