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Expense purchase costs of UK Furnished hol. let.?

Furnished Holiday Lettings UK (FHL) - Accounting treatement on initial purchase costs

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Hi All,

I am hoping to confirm my suspicion here. A client of mine mortgaged an FHLin Sep 2018 via Limited company. They paid a deposit of £150k on a £500k London property. Property meets all the rules of occupancy etc of an FHL. First accounts being drawn up now and the argument is whether the mortgage deposit of £150k should be expensed? I am aware of the Annual Investment Allowance (AIA) being allowable up to £1m but I cannot see a definition that includes building and land. I am thinking this is an investment and a liability in the balance sheet with deposit being capitalised alongside some of the other purchase costs.

Any help will be much appreciated.

Thank you in advance

Replies (18)

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By johngroganjga
29th Apr 2020 08:21

I know what a deposit in a property purchase is, but what is a "mortgage deposit"?

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Replying to johngroganjga:
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By tljenkin007
29th Apr 2020 10:05

Sorry, I was just referring to the downpayment on the property, thanks

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Hallerud at Easter
By DJKL
29th Apr 2020 09:41

Sorry, you really need an accountant,you cannot possibly be an accountant, under any definition of the word, and conceivably ask the first part of your question.

As a rough clue,

Dr Investment Property 500
Cr Bank 150
Cr Bank Loan 350

This is really, really, really basic, school 15-16 year old level basic, if that.

Every debit has a credit.

Re the AIA issues, you are into the realms of integral fixtures etc and if you do not take professional advice re this aspect then you are really beyond redemption; Fools walk where Angels fear to tread springing to mind.

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Replying to DJKL:
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By tljenkin007
29th Apr 2020 10:06

That was my suspicion. A bunch of qualified accountants are arguing otherwise, I was right. Thank you for your help and insults, I learn something new everyday :)

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Replying to tljenkin007:
Hallerud at Easter
By DJKL
29th Apr 2020 10:10

A bunch of qualified accountants are arguing the cost of purchasing a FHL within a company ought to be expensed? Really? Ask to see their bits of paper.

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Replying to DJKL:
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By alfredpennypinch
29th Apr 2020 10:56

Many years ago when I was still training, I had a CTA qualified tax manager, no less, ask me why I'd added back depreciation to Net Profit in a tax comp.

You can apparently get pretty far in collecting bits of paper while missing the entirety of day one learning.

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Replying to alfredpennypinch:
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By Tax Dragon
29th Apr 2020 11:14

Could asking questions be a way of teaching?

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Replying to Tax Dragon:
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By tljenkin007
29th Apr 2020 11:29

I guess so... depends on the individual.

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Replying to Tax Dragon:
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By alfredpennypinch
29th Apr 2020 12:32

Yes, it can.

But it wasn't.

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Replying to DJKL:
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By tljenkin007
29th Apr 2020 11:08

I just showed them this thread, pretty quiet virtual bunch :)

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Replying to tljenkin007:
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By Tax Dragon
29th Apr 2020 10:12

tljenkin007 wrote:

Thank you for your help and insults

That you elicited such a response from DJKL says a lot about your question.

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Replying to Tax Dragon:
Hallerud at Easter
By DJKL
29th Apr 2020 10:50

Actually may say more about the weather today, though the first part of the question did take my breath away- it has gone a bit chill up here (think wind from East) so prospect of packing in at say 3.30 to work in the garden is now far less likely which has possibly left me a tad irritable.

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Replying to DJKL:
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By tljenkin007
29th Apr 2020 11:10

Dont be! Life could be a lot worse. Be grateful!

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Replying to Tax Dragon:
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By tljenkin007
29th Apr 2020 11:09

Tax Dragon wrote:

tljenkin007 wrote:

Thank you for your help and insults

That you elicited such a response from DJKL says a lot about your question.

I just showed them this thread, pretty quiet virtual bunch :)

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Replying to tljenkin007:
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By Cheshire
29th Apr 2020 11:20

''I just showed them this thread, pretty quiet virtual bunch :)''

Hilarious!

May be you should get ones you can see....albeit from a safe social distance.

In the history of man, well almost, Ive never seen DJKL so riled. Get that aggression out man. I feel your pain...all those nice days seeing neighbours in their gardens whilst I was stuck in my office!!!!!!

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Replying to Cheshire:
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By tljenkin007
29th Apr 2020 11:27

COVID19 does have this effect. I can only feel his pain some :)

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By Wanderer
29th Apr 2020 09:59

tljenkin007 wrote:

and the argument is whether the mortgage deposit of £150k should be expensed?

No, just no.
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Replying to Wanderer:
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By tljenkin007
29th Apr 2020 10:07

Thanks for confirming what I know as per FRS102 etc :)

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