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Query - Advice Please

I have just taken on a new client and am having a TFI Friday moment.

Books and records have been passed to me and going through old accountants info I could do with some advice on the following: -

Client has several properties which are rented out and this is only income.

Old accountant has tax return showing self employment and property section completed.

Cant see why but the Balance Sheet of SE shows the properties as WIP with the cost price and improvements made.
Also on Balance Sheet are the mortgage balances.

There was a very small bit of work done on the side in the pvs year, which will not be repeated.

I thought the best way was to just produce a rental income and expenditure account showing income less repairs, insurance, interest, telephone etc. and that be declaredd on the Tax Return.

I presume that the old accountant has done the P&L and B/S which shows expenses on and a loss each year so that when the property
is sold they offset this against the profit and bring in the WIP as a cost of sale.

I thought you just completed the CGT section when selling a property.

Any pointers or advice on this would be helpful.

I am going home for a bottle of wine now.......hopefully the Friday head ache will have gone by Monday and I can look at this again.

Have a good weekend everyone and cheers

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19th Jun 2009 17:24

Is it a property development business?
Usually a property development company treats the properties as WIP as well as any development costs; when sold then an Income Tax profit is made (in theory) rather than a Capital Gain. It's all to do with these "adventures in the nature of a trade".

Have another close look at the business and see if it could be considered as a property development opportunity as the previous accountant may have, possibly through discussions with the client, agreed that this was the intention.

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By Anonymous
22nd Jun 2009 09:17

As above
it does seem odd, but possibly it has been viewed as a property development business - though it doesn't sound like one.

Rental income accounts returned on property pages should still be prepared on a true & fair basis and if there are mortgages the balance sheet and capital accounts should be maintained to prove the allowability of interest relief on refinancing

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