When to declare property income

When to declare property income

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I know 2 people who inherited a house about 5 years ago, which they let out about 4 years ago.  They inherited with it some cash which they used to repair and update the house before they let it out, and these amounts plus additional funds put in for repairs etc have been treated as a 'loan' to the rental business.

The rental income they have taken out is about to at last offset these loans put into the 'business'.  I have seen various opinions in the past so the questions are:

1  Should they have been declaring the income over the last 4 years even though it has only been used to pay themselves back?

2  If so how do they do it?

3  If it is not producing a net income until 2014/15 why should they not declare it until next year?

Replies (5)

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By The Innkeeper
05th Jan 2014 16:04

Oh dear

Rental Income ( or any other income) needs to be reported from when it commences. No ifs no buts.

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By ACDWebb
05th Jan 2014 16:08

In order ...

1) Yes

2) Have a look HERE and/or by telling HMRC they have been receiving property income

3) Are you sure it has not been producing net income already? The 'loans' are not allowable deductions. The 'repairs' may  have been, but the 'updates' are probably capital and not allowable against income

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By King_Maker
05th Jan 2014 16:53

HMRC are not too likely to be concerned with rental Losses, IMHO.

However, you will need to report these Losses to HMRC (via SA or letter depending on circumstances) if they are to be utilised against rental profits.

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Replying to lionofludesch:
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By ACDWebb
05th Jan 2014 19:03

But

King_Maker wrote:

HMRC are not too likely to be concerned with rental Losses, IMHO.

However, you will need to report these Losses to HMRC (via SA or letter depending on circumstances) if they are to be utilised against rental profits.

...have they actually got losses? They inherited a property & spent money updating it for letting. Might be allowable. Very well could be capital improvements & not.
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By andy.partridge
05th Jan 2014 18:03

. . . And also
The proposed concept of the income as a loan repayment may be nothing of the sort.

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