Tax deducible costs following renting to pay for care home?

by Readers Question

8:07 AM, 2nd January 2020
About 3 months ago

Tax deducible costs following renting to pay for care home?

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Tax deducible costs following renting to pay for care home?

Two years ago my Nan, who had dementia, went into a care home. In order to help pay for the care home we (her family) decided to rent out her home, which she was the sole owner of.

My mother had Power of Attorney so was able to act on my Nan’s behalf. The tenants moved into my Nan’s house 15 months ago and my Nan wasn’t a landlady before this.

Various necessary costs were incurred refurbishing my Nan’s home ahead of it being rented out. These costs were borne by my mother. Any money that my Nan had was being used to pay the care home fees. Some of these costs were, to the best of my knowledge, tax deductible.

Unfortunately Nan died 2 months ago.

My question is whether my mother, the new owner of my Nan’s home, and so now a landlady, will be able to use these costs, that she incurred, to reduce her tax?

Apologies if this is a silly question, I’m just trying to sort Nan and Mum’s tax out correctly.

Thanks in advance

Steve



Comments

Ian Narbeth

17:20 PM, 2nd January 2020
About 3 months ago

Dear Steve
Sorry to hear of your Nan's passing.
Your mum should ask an accountant. The money paid by your mother may be treated as a loan to your Nan and then be deductible as expenses in your Nan's tax calculation. The loan may then be repayable as a debt out of your Nan's estate. However, you must get professional advice as it is easy to get this wrong and lose out.

Paul Shears

22:44 PM, 2nd January 2020
About 3 months ago

I think you are in a good position financially.
The preparation investment can be deducted as a one off cost and assumed from the taxman's point of view to have occured on the first day of renting. These costs can then be offset against future tax liability on the house rental income.
Legally speaking the holder of the Power of Attorney was effectively acting completely on the donors behalf and is regarded in law as being the same person with the same authority for all financial matters.
I have no doubt that you will have learnt the hard way that you have to get past corporate helpdesks to get someone who is capable of understanding this.
The responsibility of being a Power of Attorney can sometimes be tedious but you need to be very clear of the correct details in law and stand up to the well meaning staff repeating corporate scripts.
Frankly it can be hell dealing with this as every financial institution and, indeed, subsections of those financial institutions, (Incorrectly) interpret the law differently.
However all this ceases to be the case once the Power of Attorney effectively ceases which is on the demise of the donor.
Thereafter the matter becomes an estate management matter including any previous financial overheads, tax details or income as outlined above.
Be very clear that your Nan's finances, whilst previously handled by the Power of Attorney, are quite separate from those of the Power of Attorney themselves.

Lindsay Keith

17:51 PM, 3rd January 2020
About 3 months ago

Another small point which may not affect you at all but, just in case. You may have to remind various (inherently lazy) corporate bodies that the Data Protection legislation is just that, protection NOT obstruction. Best of luck to you!


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