I have owned 2 foreign properties since app 2004. One in USA & the other in Portugal (PRT). I am being told that from 2011/12, details of the PRT property have to be included in the HMRC Tax Returns for UK & EEA properties section. As such, I am also being told that the 10% Wear & Tear allowance which I have been claiming in previous tax years is no longer available. As such this means that my taxable income for UK Tax purposes will be increased substantially compared to previous years. Is this correct ? If so, how else can I reduce my taxable UK income - e.g. Capital Allowances, AIA & other similar allowances. But even if any of these are available, it would rely upon capital expenditure being made in the future or during 2011/12 which is unlikely. In the past I have obviously not claimed for Capital Allowances, does this mean that I can revisit those years for Capital Expenditure - e.g. installation of water systems, air conditioning/heating system etc ?
Any suggestions/advice would be greatly appreciated
Frank James
Replies (4)
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In respect of entering EEA properties on the UK sections, this has been the case since a technical note issued by HMRC in 2009.
the 10% Wear and Rear allowance is only available for Furnished Residential Lettings, and NOT Furnished Holiday Lettings, and so it may be you have incorrectly claiming these in the past on the EEA propetrty following the change in rules above.
You may claim Capital Alliwances etc. I suggest you read the rules and guidance on the HMRC website, see http://www.hmrc.gov.uk/manuals/pimmanual/PIM3000.htm onwards
The self aseesment helpsheets also contain useful summaries:-
http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=eivrfAKnP64&f...
http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=L902pc5Wsb8&f...
Capital Allowances Fixtures
If your property in Portugal meets the qualifying criteria for a furnished holiday let you will be able to claim a proportion of capital allowances for the years 2010/11 & 2011/12. This includes fixtures such as the heating system but also sanitary wear. Typically the pool of capital allowances is the equivalent of 25% of the purchase price plus any major refurbishment work.
You may need to services of a capital allowances specialist to do this and to get the full benefit the work needs to be completed before 31st January 2013.
John Plumridge
US taxes
It would be worth looking also again at the US rental property as well to make sure that all expenses such as inspection visits are included and that the US tax returns that have been filed to date have been claiming the optimum depreciation method - otherwise there is a risk of increased and unnecessary tax on eventual sale.
David Treitel | Managing Director | American Tax Returns Ltd
Email: [email protected]