Thanks very much for your reply. The HMRC web site says "A furnished property is one that is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc." I don't know what the basis for this is, but it sounds reasonable at least in layman's terms.
I'm not sure it changes the conclusion, but thought it may be of interest.
Am I right in thinking that you are saying that the expenses are not allowable as a trading expense in calculating the corporation tax liability?
The company has borne the costs and written them off in the profit and loss account - the shareholders will be selling their shares in the company to a third party (the CGT on the sale of shares their shares is not relevant to the buyer whom I'm advising).
Because of the tax treatment in the hands of the recipient The service charges are received by a property management co, but as trustee for the lessees under S42 of the Landlord & Tenant Act. The receipt of service charges by the trust is effectively exempt from tax; so I've a feeling that this is mirrored by service charges paid (by a lessee who lets their property) being not allowable.
The beneficiaries were the executors. The tenancy agreement (which commenced after probate was granted) was taken out with the beneficiaries as landlords following solicitors' advice. The beneficiaries also personally incurred expenses before the tenancy started to get the property into a lettable condition. The solicitors regarded the transfer of title as a formality.
Under the circumstances, could the letting be treated as as personal income.
(However if it was treated as estate income and will gives a beneficial interest in the property to the beneficiaries then surely the income would not form part of the residue.
Vaughan - thanks for your reply. Presumably the 10% discount doesn't apply when the property is owned 50/50 by husband and wife because they are connected and are likely to act in tandem as regards the property.
It may be a bit of a moot point, but an adult child is arguably not unconnected (in the real world) - or at least more connected than someone that isn't a close relative! Is there a rigid approach or could it be argued that the 10% discount shouldn't be applied in this particular situation.
My answers
Thanks
Paul
Thanks very much for your reply. The HMRC web site says "A furnished property is one that is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc." I don't know what the basis for this is, but it sounds reasonable at least in layman's terms.
I'm not sure it changes the conclusion, but thought it may be of interest.
Thanks -this may be of interest
Thanks I've just come across this which refers to the kitchen on page 8 http://www.hmrc.gov.uk/briefs/income-tax/draft-guidance.pdf
Thanks - that seems to make sense
Clarification
Marion
Thanks for your reply.
Am I right in thinking that you are saying that the expenses are not allowable as a trading expense in calculating the corporation tax liability?
The company has borne the costs and written them off in the profit and loss account - the shareholders will be selling their shares in the company to a third party (the CGT on the sale of shares their shares is not relevant to the buyer whom I'm advising).
Because of the tax treatment in the hands of the recipient
The service charges are received by a property management co, but as trustee for the lessees under S42 of the Landlord & Tenant Act. The receipt of service charges by the trust is effectively exempt from tax; so I've a feeling that this is mirrored by service charges paid (by a lessee who lets their property) being not allowable.
Furnished lettings - Tax treatment of service charges paid
I wonder if someone has come across the above situation - any thoughts?
tax treatment of service charges
Thanks for asking for clarification.
It is a furnished letting, where the tenant lets the property to someone else, but pays the service charge.
Thanks for your help that's really helpful.
Regarding your last comment shouldn't the purchase price be the probate value?
Solicitors advice
Thanks I probably should have mentioned this:
The beneficiaries were the executors. The tenancy agreement (which commenced after probate was granted) was taken out with the beneficiaries as landlords following solicitors' advice. The beneficiaries also personally incurred expenses before the tenancy started to get the property into a lettable condition. The solicitors regarded the transfer of title as a formality.
Under the circumstances, could the letting be treated as as personal income.
(However if it was treated as estate income and will gives a beneficial interest in the property to the beneficiaries then surely the income would not form part of the residue.
connected person?
Vaughan - thanks for your reply. Presumably the 10% discount doesn't apply when the property is owned 50/50 by husband and wife because they are connected and are likely to act in tandem as regards the property.
It may be a bit of a moot point, but an adult child is arguably not unconnected (in the real world) - or at least more connected than someone that isn't a close relative! Is there a rigid approach or could it be argued that the 10% discount shouldn't be applied in this particular situation.