Caravan letting - opening year

Caravan letting - opening year

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Taxpayer buys a holiday caravan at a fixed location. He uses it personally for a few weeks per year and rents it out for the remainder. The vendor operates the site at which the caravan is located, and as part of the deal the vendor retains the right to receive the rental income for the first season. The purchaser remains liable for the running costs, finance costs, site fees etc throughout.

1st question is whether there is enhanced capital cost by reason of the unascertainable consideration (being the expected rental income for the initial season) and whether those rent receipts should be shown as taxable income in the hands of the purchaser.

Proceeding on the assumption that there is not rental income chargeable on the purchaser in that period, are the running costs in that initial period deductible? Clearly there will have to be some private use adjustment. If the actual private use of the caravan is (say) 10%, does that mean that the other 90% of the costs which would normally be allowable remain so notwithstanding this arrangement (and so giving rise to a substantial loss in that year)?

I suspect that these contract terms are pretty commonplace among those who deal in holiday caravans, but I tried speaking to some tax offices that deal in tourist-heavy areas and they did not seem to have an opinion.

Thanks, for any feedback, if this scenario is familiar.
Clint Westwood

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