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Any Answers Answered: Property losses and marriage allowance

9th Feb 2018
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This month TAXtv hosts Tim Good and Giles Mooney answer questions about property losses and the interaction of farmers’ averaging and marriage allowance.

To watch the full video of Good and Mooney answering readers’ questions, click here or scroll down to the bottom of the page.

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Property losses carried forward

The first question tackled by the tax aficionados relates to property losses and was asked by AccountingWEB member RG.

“Taxpayer has £12k of losses carried forward from one and a half properties. He moved back into his solely owned flat for an entire tax year, whilst renovating his main residence, then let it again. He continued letting another property with his spouse (which made a small loss for 16/17). Can all the losses be carried continue forward against future profits?”

The question he’s really asking, according to Mooney, is whether it is okay that he owns all of some of the properties and only part of the others?

Good felt that the answer was fairly straightforward: yes, it is okay.

“If you’ve got a scenario where a couple jointly own a property and it’s not a partnership – which is an important proviso – then the half-share that each of them has will be treated as part of that individual’s property letting business,” said Good.

“The husband can own a property on his own and have a half interest in a property he owns jointly with his wife. If that husband has a single property letting business comprising one and half properties, the losses and profits will then be pooled and any excess losses carried forward against future property letting profits from that property letting business,” he continued.

According to Good, the key thing is to distinguish the treatment of property that is jointly owned without there being any question of a partnership, and property that is owned by a partnership.

The pair went on to discuss the relatively new restriction on finance costs in property letting businesses – for more details see 2:15 into the video.

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Farmers averaging and marriage allowance

Part two looks at a very specific question from Jamie Thompson, who asks about the interaction of farmers averaging and marriage allowance:

“Example situation:

Farmer husband 15/16 nil taxable, 16/17 £30,000 taxable.

Wife employed earns £5,000 in 15/16 and 16/17.

Husband averages in 16/17, so averaged profit in both years is £15,000.

Can wife transfer marriage allowance in both 15/16 and 16/17?

16/17 is clearly ok, but what about 15/16?”

Mooney framed the question as follows: can marriage allowance work in both years?

“There’s no benefit to it if we both left the figure at nil, we could get benefit at £30,000, but by changing that to averaging, having £15,000 and £15,000, can we use some of that unused personal allowance to wipe out the tax liability?” said Mooney.

The point of the question, said Good, is that in the first of the two years because the husband’s farming income is zero there wouldn’t be any benefit in transferring the marriage allowance from the wife. However, after averaging he’s then got £15,000 of taxable income in that year and so the benefit can arise, so the answer is yes, it is possible to do that.

Good went on to advise that when the averaging claim is made in the second year’s return, there should be a claim made for the marriage allowance transfer in respect of the first year.

“In that situation,” added Mooney, “if the wife has only used £5,000, she would have at least £5,000 left over that would wipe out any tax bill for the husband”.

However, Good cautioned that we are not allowed to transfer unused amount of the personal allowance. The marriage allowance is given at a fixed percentage of the total personal allowance, and that is 10%.

“For 15/16, when the personal allowance was £10,600,” said Good, “the marriage allowance transfer will be £1,060 to be given at basic rate.”


For the latest episode of TAXtv visit PTP Interactive. TAXtv is a monthly tax update programme available as an annual subscription from £199, (11 issues plus special editions) to view online, download from the internet or watch on DVD.

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