Tax on property business – 7 year rule & business travel
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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Member Since January 2011 - Comments: 12217 - Articles: 1412
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 …..
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.
Member Since July 2013 - Comments: 34
1:41 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
Member Since July 2013 - Comments: 293
11:22 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.
Member Since July 2013 - Comments: 1266 - Articles: 1
11:28 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.
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.
Member Since July 2013 - Comments: 1434
11:17 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.