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only expenses no rental income -

only expenses no rental income -

Hi

I have a client who purchased a house and incurred certain expenses with the view to letting (assume revenue expenditure) it but has changed his mind and put it up for sale before renting it. Can he claim the expenses and show losses (which can then offset against rental profits from other buy to lets)? thanks

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02nd Mar 2016 19:20

Original intention was to let so yes, sale will be subject to cgt not income tax.

If he starts doing it regular (selling before renting) hmrc could question his intentions, and could argue he is a prop developer

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By Ruddles
02nd Mar 2016 23:16

That wasn't the question.
If the property was never brought into the rental business I'd doubt that any of the costs would be relievable. But here's a tip - if you want a proper answer provide some proper information.

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03rd Mar 2016 07:46

Yes he can - so long as he
Simple answer - Yes he can

Do need a little more info for full answer though

Ruddles - are you the question police ?

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By Ruddles
03rd Mar 2016 08:23

No
I'm the answer police.

I'd be interested to know the explanation behind claiming expenses relating to a property that was never brought into the property business.

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03rd Mar 2016 09:05

hi the client was hoping that e would get certain planning permissions to extend the property but he is not and also far from where he lives and cannot manage as FHL for practical reasons. that is the reason he changed his mind.

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03rd Mar 2016 09:22

.

Planning permission for an extension that has not been built would presumably be as "tax nothing" in any case. it wont be an expense by definition, and it cant be offset against the capital gain on the eventual sale as there is no enhancement against which to offset the cost. 

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By JimFerd
03rd Mar 2016 10:00

I also believe that there's a rule that if the expenditure was incurred prior to the property being in a rentable state - then it's capital.

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03rd Mar 2016 10:09

You're making an assumption

JimFerd wrote:

I also believe that there's a rule that if the expenditure was incurred prior to the property being in a rentable state - then it's capital.

 

You're making an assumption about what the expenses are, which of course you have to because at no point have we been told this fairly important piece of information.

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03rd Mar 2016 10:16

Hi

the client has not done any work on building an extension. All expenses were revenue e.g mortgage interest, council tax when empty, light & heat, some repairs, travelling etc. 

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03rd Mar 2016 10:26

For what it's worth

My opinion would be that he could claim the costs provided he was actively trying to get to a position where he could let the property while he incurred them (so trying to get his planning permission in this case).

Given the OP seems to imply that other properties are being let, this sounds like an extension of his ongoing rental business.  Or if the other lettings are planned but not current, won't any losses be (ha!) lost anyway when he sells the property?

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