Property Tax return - carrying losses from previous years

pedders09

Hi all,

I've been letting out my former home for 4 years after moving to another part of the country for work purposes. In previous years I didn't bother to complete a tax return simply because I was not making any profit (actually small losses year on year). However, due to the recent interest rate reductions, I will have a profit for the tax year 08/09 so I intend to complete a tax return this year and pay the tax that will be due. My question is this - when I complete my tax return and property pages for 08/09 and use the box for losses carried forward from previous year, am I allowed to "total up" all the loss figures from all of the previous tax years or am I only allowed to quote the actual loss for previous tax year 07/08. Or will they insist on me completing tax returns for all the previous years to achieve the aim of carrying all losses forward.

Let me know your thoughts on the above.

Thanks guys :rolleyes:

Money_Grabber13579

As far as i'm aware, the revenue will need to know about those losses before they will allow you to take them off. I think you'd need a tax return for all the previous years.

Elaine_Wilson

Write to HMRC and detail the claim for losses over the past four years. They may well accept this without asking you to complete returns. Dont send any supprting documentation with the claim. If they wish to verify the figures they will ask you for them.

I would make sure this claim has been sent before filing your 2009 return. Then you can include the losses brought forward in the return as they have in fact been claimed.

pedders09

Thanks for the info so far. :T

If I actually write a letter to HMRC and quote my figure for the losses so far, I am wondering about how best to word the letter. I've always intended to fill a tax return as soon as I came into profit and did not realise until recently that I could carry forward losses into profitable tax years. But to do this, they obviously need to know about the previous years. I would rather achieve this without the need to fill more paperwork than necessary. Any advice on how best to structure this initial letter??

My thoughts on what to write to HMRC are as follows:

1. State that I am letting out a property but have made losses prior to tax year 08/09. The figure for the loss is X.
2. For tax year 08/09, I am returning a profit and therefore request a self assessment tax return form so I can pay the tax due.
3. I intend to enter my previous loss figure onto the 08/09 tax return.
4. Let me know if I need to do anything else.

After this, I can supply the relevent documented proof of figures for 05/06, 06/07, 07/08 if they ask for it. Hopefully, they will take the loss figure quoted in my letter at face value without me needing to complete tax returns for previous years. The loss figure is quite small and to be honest I was just happy that the rent covered the mortgage interest. I'm basically an accidental landlord and not looking to make huge profits out of this exercise. However, now that I am making a profit due to lower interest rates, I'd rather be up front about it with HMRC.

Cheers

BoGoF

At the very least they will ask for a statement of the income and a breakdown of the expenses. If you just say I made x amount of losses that will not be sufficient.

pedders09

Righto. I've got all my letting agent statements filed away so supplying accurate breakdown is not a problem.

Just one further question which may seem a bit dumb but want verification!

Each of my monthly letting agent statements has the breakdown of initial rental income, letting agent fee (10%), vat on agent fee, and any expenses (i.e. repairs actioned via agent), with a final figure at the end which is the actual amount paid into my bank account.

When it comes to filling in the tax return, can I just quote the total figure for the year that was paid into my account with expenses already excluded and not bother providing a separate figure for the small expenses since this is already excluded from my total income figure that was paid to me for the year. Therefore, the taxable amount will just be the difference between the total amount paid into my bank account and the total mortgage interest for the year. This seems a more straightforward way of reporting it and since the amounts on the tax return will match up exactly with my letting agent statements and mortgage statements, these numbers can be easily verified by the taxman.

I guess the short version of the above question is this: When doing the tax return form, if my rental figure is say £1000 per month but £900 after fees, etc are taken out, do I quote 12x£1000 of income (and also quote an expenses figure containing all expenses in appropriate box) or do I put 12x£900 of income (and just have mortgage interest total in expenses box). Is it acceptable to do it that way? :rolleyes:

Please note, the above simple scenario assumes that there were no other expenses apart from those already itemised on the letting agent statements and the mortgage interest.

Also, I pay VAT on the letting agent fee so I assume that is considered as an expense as well?

Let me know your thoughts on this.

pedders09

I think I will assume that I can include VAT on letting agent fee as an expense as well.:cool: