Urgent help needed property - tax return!!

Chichi_2

Doing online self-assessment on behalf of someone and fine-tuning before I submit it, I have a few questions:

The person receives rental income on BTL property

Property was bought in March 2007 and money was spent to obtain loan,conveyancing, paint property etc... before 6 April 2007. Some furnishings were bought after 6 April 2007. Property was let out late April 2007.

1) What do they mean by costs of obtaining loan?
2) I have included the monthly mortgage interest payments as property expenses. Is this ok .What more can be claimed?
3)Can I claim for the painting/decoration if it was paid pre 6 April 2007?
4) If the answer to qu 3 is no and No tax return was made in Tax year 2006 -2007, how can this large decorating expense be included?

Would appreciate more detailed advice about what can be included as expenses on the form???

Thanks in advance... nearly there.

fengirl_2

1. Fees payable to mortgage, etc broker - not allowable.
2. You can only include interest paid on the mortgage. Include whatever else you pay in connection with earning the income - insurance, gas safety certs, repairs, agents fees, etc.
3. No, this was merely to put the house in the state to be let. ONly redecoration between lets is allowable.
4. It can never be included.

If you are letting furnished you can include a wear and tear allowance of 10% of the gross rents less council tax and utilities (if paid by you).

pchelpman

Actually, Chichi, you should familiarise yourself with the Property Income Manual (PIM) from the Revenue. Yes, it's only THEIR view of the law - so it may differ from the views of external tax professionals in some minor areas - but, generally speaking, it is an excellent guide to the rules.

The PIM is here ...

http://www.hmrc.gov.uk/manuals/pimmanual/index.htm

Crucially some rules have changed and the whole approach to property income now is to treat it, in many ways, as a normal "business" (although the income itself is still viewed as income from an investment rather than a trade).

This means that many running, repair, redecorating and other maintenance costs incurred before the letting started are treated as "pre trading expenses" and are deductible IF they would be deductible had the money been spent after the letting started.

Such expenses incurred within seven years before the commencement of your business may still be allowable if they would normally be tax deductible. In such cases the expenses may be claimed as if they were incurred on the first day of the business.

Hope that helps.


PCH

Chichi_2

You guys are great!!! Thanks for taking the time to answer my query fully.