Can inept landlord now change his mind about split of capital/revenue expenses?

Can inept landlord now change his mind about...

Didn't find your answer?

Inept landlord spent £30,000 doing up rental property several years ago.

Originally calculated £21k was revenue expenditure and £9k capital expenditure. This sat fine then because landlord said "no way am I going to sell property. I can easily get tenants".

Trouble is, no rents ever forthcoming. Estate agent said he could attract tenants but failed. The only tenant who rented the house failed to pay any rent and stole the landlord's belongings.

So personal tax return filed showing £21k rental losses to carry forward.

Landlord now wants to sell property and there will be a large capital gain.

In hindsight, landlord should have claimed no revenue expenses. It may be possible to now argue that the whole £30k was capital expenditure to set against sale proceeds.

But is there any circumstance in which landlord can now change his mind, or has he lost the £21k expense allowance for good.

Replies (5)

Please login or register to join the discussion.

avatar
By User deleted
19th Oct 2015 15:25

Not a question of changing his mind.  Was the expenditure capital or revenue?  That doesn't (as far as I can see) depend on how circumstances change subsequently.

Thanks (1)
Stepurhan
By stepurhan
19th Oct 2015 15:24

Question of fact

Whether a payment is capital or revenue is, to a large extent, a question of fact. You can't just decide they are one or the other depending on your plans for the property.

So, as a matter of fact, were the expenses misclassified originally? Some expenses it might be possible to argue either way, but it is unlikely that this will apply to the whole £21,000. Also, how long ago is "several years ago".

Thanks (1)
By penelope pitstop
19th Oct 2015 15:29

Date of expenditure

Thanks for responses.

In response to stephurhan, most of the expenditure was incurred 2010/11, but some was incurred 2009/10.

Thanks (0)
By cheekychappy
19th Oct 2015 15:54

BTL isn't all plain sailing

I do hope you didn’t categorise the expenditure based on the scenario at the time rather than the nature of the expense.

 

It is a failed property business. Your client is now disposing of an asset that is subject to a different tax (CGT). It would seem (if you did your job correctly) that most of the expenditure was revenue, and there isn’t much capital expenditure to mitigate the gain.

 

Tell your client that this is great example of a failed property business. You can do sod all with the losses and you pay tax on any gain over and above the annual threshold. Ask your client if you can use him as a case study on your website … that should make his day.

Thanks (1)