Wear and tear allowance calculation

Wear and tear allowance calculation

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is it just council tax and water rates or should electricity, gas and things like this also be deducted if paid for by the landlord?  what about things like gardening fees if the landlord pays for these as there are not 'expenses normally incurred by a landlord'?

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By A mum and an accountant
05th Oct 2012 21:45

To calculate the wear and tear allowance, you deduct just council tax and water rates from the rental income.  The rest are expenses that are declared in the rental profit and loss account.

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By nogammonsinanundoubledgame
06th Oct 2012 08:22

To calculate the wear and tear allowance:

http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm

"The wear and tear allowance is calculated by taking 10% of the net rent received for the furnished residential accommodation. To find the ‘net rent’ you deduct charges and services that would normally be borne by a tenant but are, in fact, borne by the taxpayer (for example, council tax, water and sewerage rates etc)."

The items in parentheses are examples only.

With kind regards

Clint Westwood

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By Steve Kesby
06th Oct 2012 12:39

To calculate the wear and tear allowance, for 2011/12 onwards, you deduct "relevant expenses"; being "expenses in relation to utilities, council tax or anything else the cost of which is, in the case of a furnished letting, normally borne by the lessee".  S.308C(3)-(5) ITTOIA 2005.

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Replying to Tornado:
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By marilynhawken
24th Jun 2013 01:18

claim wear and tear, and energy efficient allowance together

Hi, Steve and all, 

 

in my tax schedule, how to i show to claim both allowances? 

net income less energy first or allowance? 

 

pls reply soon, 

 

thank you. m

 

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By GR
06th Oct 2012 15:48

How do you make an election to use w&t? Tick a box on the sa100 or write a formal letter to hmrc? Thanks

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By Chris Smail
06th Oct 2012 17:38

You don't

You just do it

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By GR
06th Oct 2012 23:09

 

 

"P may make an election (a “wear and tear allowance election”) in relation to the business for the year.

(2) A wear and tear allowance election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year".

 

The legislation can be so misleading at times.....................

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By Steve Kesby
07th Oct 2012 10:14

Yes

The legislation does say that an election is required, but in practice the election will be made implicitly by simply claiming a wear and tear allowance in the Tax Return.

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By carnmores
09th Oct 2012 15:49

fascinating

you learn something new every day thanks - what does normally mean ?

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By MSunderland
10th Oct 2012 17:33

charges and services

 

 

if a communal area annual charge is paid on a flat, should this be deducted before calculation of wear and tear allowance or after?

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By Steve Kesby
10th Oct 2012 17:52

@ Carnmores

Norma Lee is Brenda Lee's not so famous sister.

I wouldn't Norma Lee expect a landlord to pay for a whole lot other than repairs.

However, where under the head lease, there's a service charge payable, I think you might reasonably argue that it is for the head-lessor to pay (it's their obligation under the lease) and charge on to the sub-lessor in the form of an increased rent, such that it needn't be deducted in calculating wear and tear allowance.

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Replying to DJKL:
Red Leader
By Red Leader
10th Oct 2012 18:36

ground rent

For some reason, I always thought ground rent had to be deducted before applying the 10%. However, I can't now find any reference to this, except there is a reference to "net rent", but not sure if that relates.

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By carnmores
11th Oct 2012 17:52

@Steve

the old records are the best records

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By dipenjoshi
31st May 2016 09:41

Hi
can anyone assist with the accounting entries for the wear & tear allowance?
How would it effect the balance sheet?

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Replying to dipenjoshi:
paddle steamer
By DJKL
31st May 2016 09:57

dipenjoshi wrote:

Hi
can anyone assist with the accounting entries for the wear & tear allowance?
How would it effect the balance sheet?

Wear and tear allowance was a tax adjustment, accordingly if an entity was preparing accounts the accounting transactions would have followed their normal accounting treatment and would then , as appropriate, have been disallowed in the tax computation and wear and tear thereafter allowed within the tax computation.

Accordingly, except re its impact on the tax calculated, it had no impact on the accounts and no impact on the balance sheet.

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