New FHL..

....where existing non-FHL properties held

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Good evening all,

My client currently has several non-FHL rental properties but is doing up a property that should meet the FHL conditions for the first 12 months of letting. Letting is expected to commence in April 2019 and there will be capital allowances so a separate calculation is necessary.

Having read through ITTOIA 2005 s264 and s327/ ITA 2007 s127/HS253, I just want to check that my understanding is correct:

That the profits from the FHL business will be calculated from the date that the FHL property is first let and any expenses/capital allowances can be claimed as pre-trade expenses/capital allowances treated as being incurred on the first day of letting that FHL property.

That my only issue will be if the property fails to meet all the FHL conditions in the first 12 months, in which case I will need to go back and amend prior year returns to include any relevant expenses in the years they were actually accrued (assuming cash basis not used) under the normal pooled UK property business rules and claiming replacement of domestic items rather than CAs.

Any comments gratefully received and thanks for taking the time to read in this busy season.

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By Tax Dragon
05th Jan 2019 09:20

I see the conundrum. At the moment it sounds like you have done all you can. And I would imagine that the domestic items relief would not apply in any event and that much of the other expenditure is also capital, so I wouldn't worry too much more about it just yet.

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Replying to Tax Dragon:
Scooby
By gainsborough
05th Jan 2019 09:35

Thanks Tax Dragon :).

Thought I'd double check my reasoning re the pre-trade expenses as I know there has been some views in the past that the FHL wouldn't be a new trade as there is only one UK letting business. However, I think s327 separate calculation rule then comes into play.

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