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Not claiming residential finance cost relief

Can taxpayer opt not to claim residential finance cost tax relief, but carry it forward instead?

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Client tax liability is insufficient to cover tax on gift aided donations so a liability is arising to cover the charity tax relief. However, automatic application of residential finance cost tax relief isn't reducing liability, but is wasting the finance costs. If the finance cost relief could be left unclaimed and carried forward it would be available when needed in subsequent years, and the tax payer's liability in the current year would be unchanged. Is it possible to opt not to apply the relief, but carry it forward instead?

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By SXGuy
29th Jul 2021 08:06

Not sure how you opt out of something you have to actually declare you want to use in the tax return.

As in, if not used it gets c/fwd

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Replying to SXGuy:
Small Dog's RAT Return
By Oldmanwetmix
29th Jul 2021 13:00

The issue was, if you choose not to claim it and pay the tax instead, can you still carry the unused forward. Iris doesn't give an option for this situation. Guidance only deals with if it's not needed to reduce tax liability to zero.

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By petersaxton
29th Jul 2021 09:17

You work out your income after expenses and then carry forward any losses.
You don't not claim expenses until later years.

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Replying to petersaxton:
Small Dog's RAT Return
By Oldmanwetmix
29th Jul 2021 13:03

But its not an expense, its a relief, and even if it was it might still not cause a loss.

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Replying to Oldmanwetmix:
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By David Ex
29th Jul 2021 14:55

Oldmanwetmix wrote:

But its not an expense, its a relief, and even if it was it might still not cause a loss.

It’s a relief for the year in question which may be, in whole or part, available to carry forward subject to certain conditions which I suspect don’t include your client’s circumstances.

Think the guidance is not enough; you need to read the legislation to be certain.

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By Tax Dragon
29th Jul 2021 14:59

The reliefs listed in s24 ITA 2007 include those under Chapters 1, 1A and 4 of Part 8.
Gift Aid is Chapter 2 - not listed.

So adjusted total income per s274AA(6) ITTOIA is based on income before any adjustment for GA. (This figure is then of course adjusted as per ss6 itself.)

In consequence, I agree with the others that the answer is "no". (Note in particular the first three words in s274AA - there's no choice given there.)

But two points. 1) Don't forget those ss6 adjustments. They might help, depending on what the non-property income is. 2) If you are looking at these rules on leg.gov.uk - it seems there's an issue with displaying formulae. For example, the "(ATI/S)×L" between "is given by–" and "where– S is" seems to be missing from ss3.

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Replying to Tax Dragon:
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By Tax Dragon
29th Jul 2021 14:48

Actually, really don't forget those ss6 adjustments. I've just tried to think about when the scenario you describe might arise... and I think the adjustments might very much be in point. (Give us some numbers to illustrate your scenario if you want.)

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Replying to Tax Dragon:
Small Dog's RAT Return
By Oldmanwetmix
31st Jul 2021 08:10

Thanks Dragon, figures are;
Emp income 12,500
Rental profit 7,000
Pers allwnc £12,500
Finance cost relief £1,000
Gift aid donations £10k gross

The amount client has to give HMRC is £2k whether or not there is any finance cost relief, so if we could get away with carrying it over to next year when rental profit will be much higher, it wouldn't be wasted (high repairs and lower rent this year).

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