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Pre-rental expenditure on inherited property

Whats's allowable on a residential letting, inherited and now a BTL

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Hi, just need some clarification on the following if any of you have the time with the January madness. My brother in law bought his mother's property about 25 years ago for the market price.  He purchased it with the view for giving his mother somewhere to live rent free and a pension plan via rental income.  When his mother went into a home it was then renovated to rent out. It is now in joint names with my sister.  They chose to rewire, replumb, new kitchen, bathroom, carpets at substantial cost in order to attract more of a rental income.  It is now let through an estate agent.  The kitchen and bathrooms were a straightforward replacement - although more modern looking, they cost £1900 and £1200 respectively, not a lot for a new kitchen and bathroom on the scale of things.  The majority of the expenditure appears to be on the 'hidden' works like rewiring, plumbing, flat roof repair, building materials & builders costs etc.  There were also finishing costs like painting & cleaning.  I was speaking to an accountant and he was a bit unsure because the property was interited rather then purchased, if it were a straightforward purchase of an old property that had been reduced to reflect the need of some modernisation then the rules applying to capital v revenue expenditure are more clear cut but I can't see anything to clarify when property has been purchased and not rented for so long, he wanted to do works to it over the years to keep it up to standard but his mother didn't want the hassle, hence the eventual high cost of the renovation work.

Many thanks

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By vodkaqueen
28th Jan 2019 20:32

Updated since posted

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Hallerud at Easter
By DJKL
28th Jan 2019 21:11

So is the M in L reservations delaying repairs similar to Odeon Cinemas delaying repairs due to the war.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35450

I am not sure of answer without reading but my gut feeling is one needs to look at its condition when introduced into the letting business ,rather than when first acquired, which is after M in L vacates.

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2030

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Replying to DJKL:
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By vodkaqueen
29th Jan 2019 12:55

I read into that, unfortunately its not the same scenario. I have an appointment booked for Feb to see a CTA advisor, HMRC's technical advisor take is they can claim nothing (!). Somehow I don't think that's correct. Fortunately there is little in the way of rental income in the 17-18 year, I'll file a provisional in the minetime to avoid any fines and amend.

Many thanks, thankfully the majority of users on this site still have manners and some common decency.

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By Tax Dragon
29th Jan 2019 06:47

Has mother died?

Tbh that's just one of a number of points that could be important that you haven't told us.

And tbh it's not YP. Your sister and her hubby are the ones that need advice. Your role is to guide them in that direction.

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By vodkaqueen
29th Jan 2019 09:51

The mother has since passed away, unfortunately this seems to be more of a tax specialist area as a couple of accountants I have spoken to are not clear on the matter, cannot get an appointment with a tax specialist until Feb. I was hoping to file a provisional for them until a specialist could amend, there is very little rental income in the 17-18 year. They should have been on this earlier, its their first year of filing accounts and are a bit clueless.

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Replying to vodkaqueen:
By ireallyshouldknowthisbut
29th Jan 2019 12:24

Property tax is quite complicated. I am always surprised by accountants thinking its easy.

You have left this ridiculously late to get advice.

The fine is only £100, which is a piddly amount of money in the scheme of things. Suck it up and do it properly when you can.

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Replying to ireallyshouldknowthisbut:
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By vodkaqueen
29th Jan 2019 12:56

ireallyshouldknowthisbut wrote:

Property tax is quite complicated. I am always surprised by accountants thinking its easy.

You have left this ridiculously late to get advice.

The fine is only £100, which is a piddly amount of money in the scheme of things. Suck it up and do it properly when you can.

And I am always surprised at the downright snotty attitude of some on this site at times who aren't capable of reading a comment properly, instead preferring to jump on something they have half read, picked out the parts they want in order to construct a narrive as an excuse to snipe and jibe at others. Do try reading again to see where you went badly wrong with your comment. f you don't want to give any advice I really don't give care but keep your downright nasty comments to yourself. I suggest you get some friends, take yourself out more, try the pub, you may feel a bit happier about your life instead of attempting to boost your ego by trolling others.

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Replying to vodkaqueen:
By ireallyshouldknowthisbut
29th Jan 2019 14:08

You are posting on a public forum.

if you and your brother openly admit to sitting on your hands for 10 months on this (plus presumably 12 months earlier when the work was being undertaken) then you cant really complain that you might have to wait until Feb to speak to someone about this. You have had months and months and months to get this sorted out, and you seem to be the one getting a bit shirty.

its clearly not a 5 minute answer ,and presumably involves more than a few pence in works. To do it properly would take some time to go through and work out what is and is not reasonable to claim based on the true circumstances. Its not something to cram into the last 2 working days of the tax year, and for the sake of £100 my advice as I would give to anyone coming to me so hopelessly late would "pay the £100" and we will do it in a couple of weeks.

That is I am afraid the best advice to complex circumstances.

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Replying to ireallyshouldknowthisbut:
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By vodkaqueen
29th Jan 2019 14:50

Oh dear, I got as far as 'you and your brother'. Again I reiterate - go back and read my original post, again and see if you can work out, all by yourself where you went so badly wrong.

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Replying to vodkaqueen:
By ireallyshouldknowthisbut
29th Jan 2019 15:00

It matter not if he is your bother, your uncle or a random off the street, or if it was him who was so lazy, or you in leaving it so late.

The advice remains the same.

Accept the £100 as a minor penalty for being so chronically lazy so as to still be doing this 2 days off the deadline, and do in properly in Feb.

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Replying to ireallyshouldknowthisbut:
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By vodkaqueen
29th Jan 2019 15:16

Er, the facts in the OP matters a lot. 'I' will not be accepting anything, neither a £100 fine that has nothing to do with me not will I be accepting the advice from someone who appears to have hit the drink at breakfast.

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By Vile Nortin Naipaan
29th Jan 2019 13:15

It's not difficult at all.

The property should be treated as purchased at its market value at the date it was introduced to the property business (when mother-in-law croaked), with such market value reflecting the state of the property at that time.

Then, to the extent that the works are essentially rectifying any significant deficiency in that value (ie which would have reduced the selling price below that for otherwise similar properties), then the costs would not be allowable.

However, speak to an agent, and they will tell you that needing an updated bathroom and kitchen, the repair of a leaky roof, a touch of paint, and the odd plumbing repair would not have affected the market value significantly. Additionally, rewiring may not have been necessary if it weren't for the fact that the property would be rented.

From what you say, I'd start with claiming all of it and then argue the toss with HMRC.

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Replying to Vile Nortin Naipaan:
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By vodkaqueen
29th Jan 2019 13:29

Introduction date makes sense. From my experience in flipping properties in the past its the hidden, often expensive works that don't affect the property price that much - the rewiring, plumbing, damp proofing etc although they do make the property more attractive to sell, but its rather the upgrade of a new kitchen and bathroom that tends to add value? It has been 15 years since I did that type of sideline though, maybe things have changed. I can gain clarification on that with an estate agent client. Many thanks for your kind input.

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Replying to Vile Nortin Naipaan:
Hallerud at Easter
By DJKL
29th Jan 2019 14:23

Do you not mean when she went into a home, surely it is the earlier point in time that it is introduced into the letting business?

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Replying to DJKL:
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By Tax Dragon
29th Jan 2019 14:34

Agreed. I have been asking around the timeline - hence, in part, my question below too.

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Replying to Vile Nortin Naipaan:
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By vodkaqueen
29th Jan 2019 14:53

Just to clarify - the death of the mother is the more important date here, apparently she was in a home for a year prior to dying. She was so odd about the property my brother in law didn't touch the house until she was gone, the date of death would probably be the most important one in this case.

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By Tax Dragon
29th Jan 2019 13:29

Just out of interest, why do you say the property was "inherited"? Has brother-in-law not owned it throughout?

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Replying to Tax Dragon:
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By vodkaqueen
29th Jan 2019 14:54

Oops, sorry, that's an error. I originally was given the wrong information, I had edited the post to reflect the fact he actually purchased the property many years ago but did omitted to change it all. Apologies, I can see how that would confuse issues!

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Replying to vodkaqueen:
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By Tax Dragon
29th Jan 2019 15:44

I’m not getting involved in your petty spat above with Atlea, but can you blame him for misreading your post when it’s full of inconsistencies? You also said that you had asked an accountant who was not sure of the position because the property had been inherited.

Once you have your facts straight, there may be some technical matters that could do with ironing out. For example, it could be hard to argue that the property was brought into the letting business until it was advertised as available for rent.

Edit: ire ally, not Atlea. My apologies to both.

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Replying to Tax Dragon:
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By Vile Nortin Naipaan
29th Jan 2019 16:13

Tax Dragon wrote:

For example, it could be hard to argue that the property was brought into the letting business until it was advertised as available for rent.

There are three issues there. First, the property business (which includes all of a person's UK or non-UK, as appropriate, property transactions) might have already commenced. Second, taking a parallel with a property that had been purchased for a property business, but needed work before it could be let, would not, ordinarily, be advertised as available to rent until those works were at least nearing completion, and undertaking such works is evidence of bringing a pre-owned property into the business. Third, assuming the repairs were incurred no more than four years before the property business commenced, then we're only really concerned with intention/purpose and the extent to which the expenditure might be considered capital.

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Replying to Vile Nortin Naipaan:
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By Tax Dragon
29th Jan 2019 16:40

Whether or not the tax payable is affected, the entries on the SATR may vary depending on which of those cases applies.

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Replying to Tax Dragon:
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By vodkaqueen
29th Jan 2019 16:26

I agree I did edit the post to clarify the property had been purchased a long time ago, not inherited and omitted to alter part of the text, however, that was nothing to do with the outrageous tone of one of the responses. Trolling does not have any place online let alone a forum that is supposed to be frequented by professionals. It lowers the tone and it is never warranted, ever. Thankfully the majority of users here have some basic manners and decency.

Edit - just seen your second post - I clarfied my error in another comment, perhaps you haven't seen it but the property was purchased and not inherited as I was originally informed. I think, from discussing with other members that the date of death is a key date in this occasion. I'm clear enough on your other points, thanks for adding, I've enough to work on the ensure a provisonal is filed for now.

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