Paying tenants to quit early – tax deductible?

by Readers Question

3 weeks ago

Paying tenants to quit early – tax deductible?

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Paying tenants to quit early – tax deductible?

I’m about to offer my tenants a few hundred quid to voluntarily surrender their tenancy early.

Can I legitimately deduct that money as a rental business expense, assuming that my tenants issue a written receipt for it?

Thanks in advance.

St Jims



Comments

Neil Patterson

3 weeks ago

Excellent question and I have no idea, but I am guessing yes as it sounds like a legitimate expense?

James Fraser

3 weeks ago

No is the official answer. I’m confident HMRC wouldn’t allow it legitimately, but since it is a genuine cost of business you could always try factoring it in as a rental loss or recording it as miscellaneous expenses. Just don’t expect to win an argument with them on it.

Position it as a refund of rent to help with their moving costs if they vacate on date xyz. Then its just less income to be taxed on. Or you could say unconditional bond refund and then then of course you will have whatever repairs, cleaning and redecoration are required as expenses.

Monty Bodkin

3 weeks ago

Why do you want them to leave?

St. Jims

3 weeks ago

Reply to the comment left by Darlington Landlord at 01/05/2018 - 20:04
@Darlingtonlandlord - excellent suggestion! I'll do that.

@James Fraser - I'm certain you're right to say that I shouldn't argue if HMRC contested it, a good way of looking at it.

@Monty Bodkin - post-S.24, the flat won't make a profit unless i turn it into a holiday let.

Ian Hamilton

3 weeks ago

Could paying tenants to leave be classed as an illegal eviction? I have thought about doing this myself in the future.

Ian

St. Jims

3 weeks ago

Reply to the comment left by Ian Hamilton at 02/05/2018 - 13:11
@Ian Hamliton

My understanding is that a tenant may volunteer to surrender their tenancy at any time, with the consent of their landlord.

I have already served them an 8-week notice to leave, but additionally I'm offering some extra money for them to leave within 4 weeks. They don't have to take my offer. If they don't take it, they get to stay another 8 weeks rather than 4.

If I were knocking on their door everyday asking them to quit and waving money at the same time, that would eventually be indistinguishable from harrassment - but instead I'm merely asking them once if £x amount is enough money to voluntarily surrender their tenancy a few weeks sooner. If it isn't enough cash, their full rights still apply.

Anyone not of the same view? Happy to be put straight on this point.

Ross Tulloch

3 weeks ago

Simple to me... it comes off your net rent from them. Audit trail on your bank account will show in and out.


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