15:12 PM, 1st November 2010, About 12 years ago 1
Buy to let property investors pay too much tax because they do not know how to claim property business expenses.
The sad fact is many accountants and tax advisers are little or no help because they do not have a clue what the taxman will allow as they are not property-orientated practitioners.
Property investors often ask for a list of expenses they can claim – but the fact is the list does not exist.
So here’s some tips about some of the expenses that cause landlords and their accountants the most problems:
Some costs, like evening classes in building skills or bookkeeping might be deductible.
The taxman imposes a rule on expenses that say if the cost involved is ‘wholly and exclusively’ for the business, then the whole amount is allowed to set off against rental income.
This means spending £20 on paint to refurbish a letting property is allowed.
Part of the cost is allowed if an ‘identifiable’ portion of the expense was for a business purpose.
So, if a buy to let investor buys a £300 mower to keep the grass down at four rental properties plus at home, then the fair way to apportion the cost is to work out the total area of the five lawns, calculate the percentage of the area of the lawn at home and claim a share of the cost.
For example, the lawns come to 500 square metres and the lawn at home is 100 square metres.
The private use area is 100 divided by 500 times 100 is 20%, leaving 80% for business use.
The business cost is 80% of £300, which is £240.
If you would like further advice on tax or accountancy please call The Money Centre’s Customer Care Team on 01603 894525 and we will be delighted to refer you to our Joint Venture Tax Partners who specialise in property taxation. The initial introduction is a no cost no obligation service