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    • 433Barbara
    • By 433Barbara 7th Mar 17, 7:25 PM
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    433Barbara
    Help pls newbie landlord-FORM 17 tax return & query PLS
    • #1
    • 7th Mar 17, 7:25 PM
    Help pls newbie landlord-FORM 17 tax return & query PLS 7th Mar 17 at 7:25 PM
    Hi, would love any help please in relation to being a new landlord and tax return etc. I've read a lot of the stuff on here & various but I'm still confused

    Basically me & hubby purchased house to let in June 16.
    Hubby works full time (pays basic tax) & I'm currently not working at all.

    Income from rental so far is £5330 pro rata . We spent about £4300 on doing it up (confusion over what I can claim for) - new kitchen, new bathroom, carpets, FUMIGATING , plaster & tiler with materials, curtains, decorating.

    I believe I can claim back mortgage interest relief but only from purchase date till 6 Apr 17 (£1607) AND council tax (up till rented out) AND Buildings insurance?

    Also not sure if we can claim back any purchase costs, mortgage fee, valuation or conveyancing fees (approx £3750) ?

    I've read a bit about Form 17 and divided ownership for tax purposes. Now although our money was pooled and as such we own 50/50 of the house I wondered if I could use all my allowance due to not working?
    I've kept a spreadsheet of all expenses and receipts but just needing clarification on whats what..... thanks in advance
Page 1
    • booksurr
    • By booksurr 7th Mar 17, 8:28 PM
    • 3,614 Posts
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    booksurr
    • #2
    • 7th Mar 17, 8:28 PM
    • #2
    • 7th Mar 17, 8:28 PM
    have you done any research of your own? You are basically asking for us to write out the entire book of taxation for you if you are unwilling to get to grips with this:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual

    Best employ an accountant for the first year so you are set on the right path, you can then simply repeat what they did in subsequent years whilst you get your knowledge up, this is a start point:
    https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-case-studies

    new kitchen, new bathroom, carpets, FUMIGATING , plaster & tiler with materials, curtains, decorating are all revenue costs so allowable against rental profit

    back mortgage interest relief but only from purchase date till 6 Apr 17 (£1607)If the property was purchased as a let then you can claim the interest from the purchase date since it meets the "wholly and exclusively" rule (ie there was no personal use by you as a home) and the 7 year pre commencement rule.
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

    You can still claim it after April 17 but it is then capped at 20% and subject to a 4 year transition period. Read:
    https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords

    AND council tax (up till rented out)
    correct, after then it is the tenants legal liability. You will however need to learn the rules regarding what happens at the end of the tenancy as it differs between a periodic tenancy and a fixed term tenancy.

    AND Buildings insurance?correct, obviously that is normally the LL's liability and is a perfectly normal revenue cost

    Also not sure if we can claim back any purchase costs, mortgage fee, valuation or conveyancing fees (approx £3750) ?all of those are capital costs against your CGT not your income tax

    as for Form 17 is the house owned as Tenants in Common or as Joint Tenants? Your options are dictated by your answer
    • 433Barbara
    • By 433Barbara 8th Mar 17, 7:06 PM
    • 60 Posts
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    433Barbara
    • #3
    • 8th Mar 17, 7:06 PM
    • #3
    • 8th Mar 17, 7:06 PM
    have you done any research of your own? You are basically asking for us to write out the entire book of taxation for you if you are unwilling to get to grips with this:
    https://www.gov.uk/hmrc-internal-manuals/property-income-manual



    as for Form 17 is the house owned as Tenants in Common or as Joint Tenants? Your options are dictated by your answer
    Originally posted by booksurr
    booksurr ---- I have done some research of my own. As for me asking to 'write out the entire book of taxation' I think is a tad exaggerated.

    HMRC and other articles I've read are confusing for a 1st timers.... hence me casting out a couple of queries just to clarify.

    I thank you for the help you have given.
    Last edited by 433Barbara; 08-03-2017 at 7:13 PM. Reason: reduced text
    • booksurr
    • By booksurr 8th Mar 17, 11:52 PM
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    booksurr
    • #4
    • 8th Mar 17, 11:52 PM
    • #4
    • 8th Mar 17, 11:52 PM
    booksurr ---- I have done some research of my own. As for me asking to 'write out the entire book of taxation' I think is a tad exaggerated.

    HMRC and other articles I've read are confusing for a 1st timers.... hence me casting out a couple of queries just to clarify.

    I thank you for the help you have given.
    Originally posted by 433Barbara
    your issues cover almost the full range of eligible costs on a property, there is no clear cut definition of each cost, it is based on understanding the concept of a revenue v a capital cost. There is no single definition of either, there are a set of principles which are in "the book of taxation" sup[ported by individual legal test cases, ie the HMRC Property Income Manual as per the link

    PS you have not answered the Form 17 question ....
    Last edited by booksurr; 08-03-2017 at 11:56 PM.
    • 433Barbara
    • By 433Barbara 9th Mar 17, 11:42 AM
    • 60 Posts
    • 11 Thanks
    433Barbara
    • #5
    • 9th Mar 17, 11:42 AM
    • #5
    • 9th Mar 17, 11:42 AM
    your issues cover almost the full range of eligible costs on a property, there is no clear cut definition of each cost, it is based on understanding the concept of a revenue v a capital cost. There is no single definition of either, there are a set of principles which are in "the book of taxation" sup[ported by individual legal test cases, ie the HMRC Property Income Manual as per the link

    PS you have not answered the Form 17 question ....
    Originally posted by booksurr
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

    Booksurr - I did not answer the 'Form 17 question' as I thought I should go do my own reading / research ..... as per your comments.

    We are joint owners but I know that I can have some of my married tax allowance allocated to hubby and didn't know if I was able to adopt something similar!? -

    I cannot understand why a few simple genuine questions asking for a little clarification (& the majority were just yes/no answers to be honest) resulted in you adopting a 'Head master' like attitude and a good old fashioned telling off in the first opening sentence.

    If you didn't want to help you could of simply ignored the thread but instead your opening line was attacking.

    These forums are designed for 'help' as not everyone has ultimate knowledge on everything ...... adopting the attitude you did ultimately deters me from posting anything in the future (hence me not asking anyone about the form 17).
    • 500pages
    • By 500pages 12th Mar 17, 6:39 PM
    • 24 Posts
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    500pages
    • #6
    • 12th Mar 17, 6:39 PM
    • #6
    • 12th Mar 17, 6:39 PM
    Hi @433Barbara, I think me and my OH are doing some similar thinking and below I've listed what I understand to date - hopefully it helps you a bit too.

    We own a flat, jointly (as joint tenants). I am a higher rate tax payer, my OH a lower rate tax payer.

    We retained the property as an income for my OH. In light of the fact that my OH is in sole receipt of the income, and takes sole responsibility for sorting things out, we would like to change the beneficial ownership to reflect circumstances and be taxed appropriately.

    We may want to change this again at points in the future, if circumstances change.

    To make this change initially, I believe we need to:

    1. "Sever" our Join Tenancy using this form: SEV (aka Form A restriction), and therefore become "tenants in common" (instead of joint tenants)

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/547443/SEV.pdf

    > we complete this form and send it to the Land Registry


    2. Submit Form 17 to HMRC, "Declaration of beneficial interests in joint property and income", which should be accompanied by a Deed of Trust reflecting the change in beneficial interest in the property - eg. to 90% in my OH's favour, 10% mine or something similar.

    https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp

    > sending this one to HMRC - i.e. the tax office


    I believe, having done a fair bit of reading online, that this is correct.

    However, I have some questions still, and if anyone reading this has any answers, that would be super:

    a) How does SDLT liability get calculated - for example, in our case, we've got a 120k mortgage outstanding on the place - I believe there is SDLT on the transfer of equity when it is subject to a mortgage, but that only kicks in above 125k and since we'd be transferring about 110k of it, notionally, it wouldn't be subject to it... ? (as a side note, we'd be transferring about £60k of cash equity in the process, too).

    b) Is the amount of the mortgage payment due from each of the tenants in common related to the % ownership - eg. if the mortgage payment is £300pcm, and I own 10%, should I be notionally paying £30pcm, and then able to offset that figure (or 75% this year, 50% next and 25% the year after as per the tax changes) against the income that I receive from the property (which I am assuming would be 10%...)

    c) I don't really fancy the idea of paying a solicitor or an accountant £250+ to draw up the Deed of Trust because I have seen such documents and they are fairly straightforward. I do understand that there is a risk that if we were to separate later on, there are implications that we may not have addressed in the deed; and we believe we would be mature enough to deal with such things in a fair and transparent manner - many people will roll their eyes and say that they've heard it before and that you should always seek the advice of a professional. And it may well be stupid naivety on our part if we don't seek the advice of a professional in drawing up said Deed. However, I would really really like to know what the risks actually are of drawing up such a document without engaging a professional - does anyone have any views on this? For example, are there actually things that could go wrong in terms of tax stuff.. (if you rolled your eyes earlier, feel free to roll them again)
    • Dazed and confused
    • By Dazed and confused 12th Mar 17, 7:12 PM
    • 1,691 Posts
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    Dazed and confused
    • #7
    • 12th Mar 17, 7:12 PM
    • #7
    • 12th Mar 17, 7:12 PM
    You cannot claim "mortgage payments" against rental income
    • 500pages
    • By 500pages 12th Mar 17, 7:36 PM
    • 24 Posts
    • 3 Thanks
    500pages
    • #8
    • 12th Mar 17, 7:36 PM
    • #8
    • 12th Mar 17, 7:36 PM
    You cannot claim "mortgage payments" against rental income
    Originally posted by Dazed and confused
    Correction, replace the word "mortgage" in that context with the words "interest on any mortgage".

    Of course in the context of a BTL mortgage, the mortgage payment is often only the interest only on a loan, so one could probably forgive a poster for mixing up the two. If one wanted to be a bit generous rather than pedantic.
    • booksurr
    • By booksurr 13th Mar 17, 12:02 AM
    • 3,614 Posts
    • 3,995 Thanks
    booksurr
    • #9
    • 13th Mar 17, 12:02 AM
    • #9
    • 13th Mar 17, 12:02 AM
    a) How does SDLT liability get calculated - for example, in our case, we've got a 120k mortgage outstanding on the place - I believe there is SDLT on the transfer of equity when it is subject to a mortgage, but that only kicks in above 125k and since we'd be transferring about 110k of it, notionally, it wouldn't be subject to it... ? (as a side note, we'd be transferring about £60k of cash equity in the process, too).

    SDLT liability does not take account of the beneficial interest share, that is because it remains on the basis that you are still jointly and severally liable for the whole mortgage itself, so it remains at the 50/50 split implicit to that liability.

    In your case she is already liable for the mortgage since she is already a joint owner and on the mortgage to start with. So there is no change, she is already liable for 60k of the 120k mortgage debt and therefore nothing has changed. There is no chargeable consideration given and thus nothing to apply SDLT to since her mortgage liability has not altered, even though the beneficial ownership has


    b) Is the amount of the mortgage payment due from each of the tenants in common related to the % ownership - eg. if the mortgage payment is £300pcm, and I own 10%, should I be notionally paying £30pcm, and then able to offset that figure (or 75% this year, 50% next and 25% the year after as per the tax changes) against the income that I receive from the property (which I am assuming would be 10%...)

    all income AND ALL COSTS must be split exactly as per your beneficial ownership. Failure to do that will have severe implications if your tax returns are inspected. As stated by dazed and confused it is not the mortgage "payment", it is only the mortgage interest which is the allowable cost (although if this is a BTL mortgage it is presumably an interest only mortgage and so the "payment" is the same as the "cost" in reality?)


    c) I don't really fancy the idea of paying a solicitor or an accountant £250+ to draw up the Deed of Trust because I have seen such documents and they are fairly straightforward. I do understand that there is a risk that if we were to separate later on, there are implications that we may not have addressed in the deed; and we believe we would be mature enough to deal with such things in a fair and transparent manner - many people will roll their eyes and say that they've heard it before and that you should always seek the advice of a professional. And it may well be stupid naivety on our part if we don't seek the advice of a professional in drawing up said Deed. However, I would really really like to know what the risks actually are of drawing up such a document without engaging a professional - does anyone have any views on this? For example, are there actually things that could go wrong in terms of tax stuff.. (if you rolled your eyes earlier, feel free to roll them again)
    doubtless there are scenarios which you you won't have thought of, but in principle i too consider that a deed can be a straightforward document to write. Of course if done as a deed rather than a declaration it needs to be witnessed...
    Originally posted by 500pages
    as above

    you have summarised the Form 17 and LR process correctly
    Last edited by booksurr; 13-03-2017 at 12:07 AM.
    • booksurr
    • By booksurr 13th Mar 17, 12:09 AM
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    booksurr
    If one wanted to be a bit generous rather than pedantic.
    Originally posted by 500pages
    you have asked for legal and tax advice, therefore pedantry is a matter of essential fact, not a game
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