10:16 AM, 17th May 2014, About 12 years ago 7
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I’ve recently been reading the HMRC toolkit about rental tax which I found very clear and informative, until however, I called the HMRC and they corrected my thinking! The confusion is over this statement:
“Expenditure incurred prior to the commencement of a rental business is allowable if it is wholly and exclusively for the purposes of the rental business and is not a capital expenditure”
You can also claim up to 7 years of expenses prior to the start of the rental business.
I assumed this would mean property sourcing costs such as attending viewing’s and estate agents at 45p a mile, Mobile phone costs etc. I was informed it was only costs AFTER acquiring the property.
But surely that flies in the face of the statement “Prior to the commencement of a rental business” as once you’ve bought the property the business has commenced
Any thoughts would be appreciated!
Thanks
Simon
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Mark Alexander - Founder of Property118
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Member Since January 2011 - Comments: 12120 - Articles: 1358
10:21 AM, 17th May 2014, About 12 years ago
This one has me stumped too.
Please re-tweet the following so that we can help Simon to find the answer to his question …..
Romain Garcin
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Member Since August 2013 - Comments: 883
11:08 AM, 17th May 2014, About 12 years ago
The rental business commences when the first property is let, not when it is bought.
Jason Holden
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Member Since July 2013 - Comments: 34
13:41 PM, 17th May 2014, About 12 years ago
Reply to the comment left by “Mark Alexander” at “17/05/2014 – 10:21“:
As stated, for a rental of property it is when it is let, also another thing to remember, when talking about property there are costs that can be incurred and then if a deal is aborted these are not allowable buy HMRC, speculative costs regarding land purchase etc.
Here is HMRC guidance:
http://www.hmrc.gov.uk/manuals/pimmanual/pim2505.htm
Use a good accountant or tax adviser they could end up saving you money in the long run!
Jason
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Member Since July 2013 - Comments: 293
23:22 PM, 17th May 2014, About 12 years ago
I can second what is said above. The rental business commences on the date of the first tenancy agreement, not when the property is purchased.
Puzzler
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Member Since July 2013 - Comments: 1264 - Articles: 1
23:28 PM, 17th May 2014, About 12 years ago
Purchase expenditure is allowable, provided it can be shown that it directly relates to a rental business (7 years prior to letting would be hard to justify even though it’s in the rules); “swanning around looking at property” expenditure is not. Apologies if that sounds harsh but since you would not be able to confirm it, it is not allowable.
Linda Price
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Member Since April 2014 - Comments: 38
8:41 AM, 18th May 2014, About 12 years ago
Reply to the comment left by “Puzzler ” at “17/05/2014 – 23:28“:
If you had all the contact with agents logged and the viewings in your diary confirmed with notes and the property details, would this be allowable? A lot of time and expense goes into searching for the right property so it would be unfair if it wasn’t allowed.
Michael Barnes
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Member Since July 2013 - Comments: 1434
23:17 PM, 18th May 2014, About 12 years ago
Buying a property is a capital expense, not a revenue expense.
Therefore it is not allowable against revenue.
The expenses you quote are to do with buying and hence are capital.
Look at it this way: If you put something new into a property, say a new shower room, then that is capital expenditure and all the associated costs are capital expenditure.
Acquiring a property is just puting a new property into your business.
I don’t know if such expenditure is claimable against capital gains, but I would have thought so.