What do you put in a set of rental accounts for an individual?
Purely drawn up for the purposes of calculating taxable rental profits to go on self assessment return. Non-ltd. I want the client to have something that looks 'nice'.
Do you bother with a proper set of accounts? If so what reports are included. Are you including an approval page?
If you're not bothering, how are you agreeing the rental profit with the client? Is it fairly informal and basically agreed through their approval of their tax return?
Thanks
Debittomycredit
Replies (18)
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depends on the client, for the clients with one or two BTLs just a SATR, for those that run it more like a business accounts as well
Depends upon software.
Mine produces a very good detailed tax return summary.
For meetings I produce the spreadsheet workings.
Either way clients get confused on interest
Either way clients get confused on interest
The transition was a nuisance but now there is no rental interest deduction at all, at least there is a clear - if commercially illogical - story.
Horses for courses. Where you have an accidental landlord with one property, it makes no sense at all to prepare anything further than the entries on the tax return but a portfolio involved with a more business like approach would benefit from a more formal set of accounts.
The additional work for something that looks nice (?) will eat into your profits as the client is unlikely to value this enough to pay extra for it. I can also see it causing more problems when having to explain the difference between accounting profits and those on the tax return - mortgage interest restrictions.
'Is it fairly informal and basically agreed through their approval of their tax return?'
Yes, in most cases.
If they are not a Ltd Company and want to pay more for a set of figures, I just provide the P&L as a short income and expenditure without a B/S.
If they only want to pay for SATR, as this sort of client provides all the info on a spreadsheet, it is just a matter of my putting the totals into the right boxes on the SATR for them (but I do a summing up on the spreadsheet to check the net profit figure).
Basically for my clients, it depends what they want to pay for my service, so I give them a choice when signing them up. Some like to see the figures laid out, others are not interested and just want to know their tax figure and sign their form.
Not once yet had a spreadsheet for rent that gave a logical 'profit' figure.
But then do not usually get spreadsheets for rent, even from traders that do use spreadsheets for the business
In my case, I prepare a template spreadsheet with headings and formulas, which includes the bank statement (with some columns and cells locked), with a checking column at the end, there is also a hidden section that populate a P & L. I just need to go through and check against invoices to make sure all in the right columns/allowable etc.
If MTD comes in, in 2023 for these people, I will use Absolute Accounts MTD Bridging Software (currently £40 plus vat for up to 10 traders on an annual license), so that they can remain on spreadsheets instead of having to pay high prices for unnecessary software).
Most cases I prepare figures on excel from bank statements and/or agents statements so it's easy enough to create a linked sheet to pull together a one page "P&L" . I usually put comparative column and if they have more than one property a column for each property. Doesn't take long and helps me spot if there are any anomolies in accounts that may need checking with client. Most find it useful (the SATR boxes do lump things together a bit). I'm not bothered about asking them to sign it, just say these are the figures on the SATR as it's sent at same time.
For my individual (one or two properties) its just totals unless asked.
My others (portfolio clients) yes... a spreadsheet . It helps the client see on one page whether the property is worth the grief of holding onto (ie which make a consistent loss).
If they are willing to pay for this service - then yes
I use excel with all the rental income on one column and expenses (separated by type) on another. I also have separate columns to show how the capital and interest have been divided and broken down and which element of interest I have claimed for, though this'll no longer apply, so much simpler.
I've never been asked for a set of accounts, so I provide the spreadsheet (for approval that they reflect business income and expenditure) and then the return pages.
I've only ever dealt with small landlords, though, so there is no need for anything more.
I generally throw a basic P&L together to match the SATR entries. If a few properties, I may do a separate page for each and then a single consolidated P&L.
For larger portfolios, they get the whole kit and caboodle.
I generally throw a basic P&L together to match the SATR entries. If a few properties, I may do a separate page for each and then a single consolidated P&L.
For larger portfolios, they get the whole kit and caboodle.
Me too. Though, offhand, I think the most properties any client has held is 6. Most of this work is pure compliance so a few notes on a sheet of A4 is usually more than enough. Balance Sheet ? No. What would that tell me?
Me too. Though, offhand, I think the most properties any client has held is 6. Most of this work is pure compliance so a few notes on a sheet of A4 is usually more than enough. Balance Sheet ? No. What would that tell me?
I disagree, the B/S is incredibly important - 10 years down the line when they sell the property - "how much did you buy it for? and how much was that new roof again, oh yeah what about that extension you had built 8 years ago...ermm" of course you can keep that analysis elsewhere but a clear record in the accounts is better IMO, any more than lets say 2/3 properties and I would put this on software with a different b/s nominal code for each property
lionofludesch wrote:
Me too. Though, offhand, I think the most properties any client has held is 6. Most of this work is pure compliance so a few notes on a sheet of A4 is usually more than enough. Balance Sheet ? No. What would that tell me?
I disagree, the B/S is incredibly important - 10 years down the line when they sell the property - "how much did you buy it for? and how much was that new roof again, oh yeah what about that extension you had built 8 years ago...ermm" of course you can keep that analysis elsewhere but a clear record in the accounts is better IMO, any more than lets say 2/3 properties and I would put this on software with a different b/s nominal code for each property
A schedule of property capital costs is grand. You don't need the whole balance sheet.
Its also very useful to keep an eye on the balance showing on mortgages, accruals, rent deposits etc, I hold to the view that anything over 3 properties and you have a business, hence proper accounts especially when putting it on software is so cheap and makes the job easier