Property Rental Expenses

Property Rental Expenses

Didn't find your answer?

A client rents a property out and in the last year has incurred significant costs relating to a roof repair - the charge being levied by the management company for the block of flats.

My difficulty is deciding which date to use for the costs. The rental accounts are to the end of March 2014, the work was agreed (by the management company) in mid March, then the cost added to a statement given to my client dated 25th March. The repair actually took place in April. My client successfully disputed the amount being levied by the management company and had it formally reduced in May/June and is now paying by agreed installments.

Question is do I go by the date the management company first levied the charge, or by when the works were carried out? If my client was engaging building contractors directly accruals concept indicates that any invoice/payment in March would be a prepayment, with the costs incurred in April (i.e. the following year).

In this case though the management company is charging and not the builder. Is the argument still that the management company charged for something not provided until the following year and so it goes into the 14/15 accounts? I'm inclined towards putting the costs into 14/15, but wondered whether I was missing a special rule around management company service charges  (I looked at "PIM1070 - Income chargeable: flat management companies", but that was mostly coming from the other side and I don't think was particularly relevant).

The client isn't worried either way and (subject to increases in other income in future) there is no overall difference in the tax payable, just a timing difference.

Thanks as always for your views.

MattG

Replies (2)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
05th Dec 2014 13:53

2014/15

As the charge relates to work to be done in 2014/15, I would charge it in 2014/15 by prepaying the expenditure in the client's accounts.  HMRC are not going to complain as it reduces the tax payable in the later year, rather than the earlier year.

Thanks (0)
avatar
By MattG
05th Dec 2014 14:01

Thanks Euan,

That was my thinking too - as you say HMRC aren't going to argue and even if they did the tax loss is likely nil in any case.

Thanks (0)