Share this content
2

Rental Property Tax

Rental Property Tax

Didn't find your answer?

A couple bought a large detached house in need of modernisation with the intention of living in it once the renovations were completed.

Renovations started, but took a long time.

They let the property to their son (at a fair market rate) for a couple of months who then decided it was too delapidated and moved out.

Are the expenses associated with renovating the property up until it was let allowable expenses even though it was only let for one month?

i.e.

Expenses

15 months mortgage interest prior to let £5400

1 month mortgage interest during let £360

9 months council tax £1125

Repairs/renewals so far £8000

TOTAL £14025

Income

£1200

LOSS £12825

Any thoughts?

Replies (2)

Please login or register to join the discussion.

avatar
By Phil Rees
05th Feb 2014 13:13

Probably not

The expenses prior to letting are associated with putting it into a lettable state and are therefore capital in nature.

I think you are looking at a profit of £840.

Thanks (0)
avatar
By bassanclan
05th Feb 2014 13:57

My understanding is that the property was in a lettable state to begin with, just old fashioned and is currently in a worse or similar state to when purchased. There is a new kitchen, but where there were two bathrooms now there is just one and one empty shell of a room waiting to be refitted.

 

The expenditure all meets the test of:

From PIM 2505:

is incurred within a period of seven years before the date the rental business is started, andis not otherwise allowable as a deduction for tax purposes, andwould have been allowed as a deduction if it had been incurred after the rental business started.

The £8000 repairs renewals is mainly a kitchen which has been replaced like for like and painting/decorating.

 

In addition there are capital costs to do with improving the property which I have ignored.

 

•is incurred within a period of seven years before the date the rental business is started, and
•is not otherwise allowable as a deduction for tax purposes, and
•would have been allowed as a deduction if it had been incurred after the rental business started.

Read more at http://www.taxationweb.co.uk/forum/decorating-a-property-just-prior-to-renting-out-t42012.html#24gVprTSvCwY5GAC.99

Thanks (0)
Share this content

Related posts