Established property lettings business. Costs spent on acquiring a failed property purchase eg broker fees etc.
This can only be a revenue expense, not capital (there is no property purchase).
Question: Is this disallowable for tax (no property) as revenue expenditure : or tax allowable, the grounds being a normal cost of buying properties for rental income? Thank you.
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So how would you explain this to a client who would not understand....
If they ain't gonna understand.... You should though. The purpose of the expenditure was to make a purchase. The fact that that did not happen does not change the nature of what was spent.
Stock is a current asset consumed in the business, purchased for resale, property here is a fixed asset used by the business and transactions re its purchase and sale are in the regime of CGT not IT. Surely something like this would work re explaining to the client ( or even the representative sample)
p.s. does this help
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35325
p.p.s. or if further light reading re capital expenditure wanted start at-https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35010
Also read the well-known comments of Lord Cave in the 1926 case British Insulated and Helsby Cables.
What DJKL said. Buying clothes? More like buying (or, here not buying) the fashion brand itself.
So how would you explain this to a client who would not understand the differences between property trader and a lettings business. Also, are you able to direct me to the law surrounding this area of tax? Thank you.
It's an easy one. A property trader makes profit by buying and selling property. A lettings business makes a profit by "exploiting"/using the property to generate income (rent). A property trader will not hold property for a long period, a lettings business typically will.
Not sure time qualifies things, we as past dealers in land have sometimes held stock on the books for years (8-10), the catch is the bigger the site, the more complex the site, the more difficult the planning process and the more complicated the resale process the slower things happen.
This cost will only be available if the client is actually in business as a property developer as Accountant A says.
The tests for trading in property are much the same as for any other trade. There is no definition in the legislation as to what constitutes a ‘trade’, therefore HMRC use the ‘badges of trade’ formula.
With one property there is no trade - its investment unless he is intending to set up in business as a property developer then it will prob be OK
Not sure on your one property rule.
SPVs are very common re development, often banking requirements virtually dictate their use, we have certainly had single site SPVs that have acquired land and buildings, sought planing, say demolished and then sold the site to builders- for years this was our secondary activity, the core business being property rental.
I would never dream of arguing that this was not trading.
I agree Jennifer's comment was odd in part. In the OP's case though there was no purchase. Development for sale of one property might make a trade, but non-development of none....?
Whatever way you cut it, the question concerns capital expenditure for which no tax relief is available.