Tax on pension and rental income

Folksdeb

I'm hoping that somebody can give me some advice. After the death of my father in 2003, my mother sold her bungalow and bought a small flat in a 'managed' complex. Sadly, her health began to deteriorate, and in Jan. 2005 she was diagnosed with dementia, and moved into a care home. Since there was a large amount of savings, (plus the property) all her fees were self-funded. In June 2005 we started to let Mum's flat, the tennant wanted to use her own furniture, so Mum's was put into storage @£200pcm. Sadly Mum died in Feb 2009, but we are now being told that the income from her flat since letting, must be assessed for tax, that although the management fees can be deducted, the storage cannot. I am just wondering if there is any way of avoiding a hefty tax bill, since over the past 5 years Mum saved the government over £100,000 in care fees by paying for herself.... seems like she is now being charged again!! Any brilliant ideas out there?

fengirl_2

Yes, the profit from the letting is liable to income tax. The fact that she paid for her own care does not enter into that.
When drawing up income and expenditure statements for the letting, it might pay you to engage an accountant. Assuming HMRC will be looking for a settlement for the lost tax, plus interest and penalties, an accountant can negotiate on her behalf and keep it as low as possible.
All expenses incurred in the letting can be offset against the income - management fees, repairs, redecoration, insurance, etc. But, as you have been told, the furniture storage is a personal expense and not deductable from the letting.

Folksdeb

thank you for your reply.... I didn't think my solicitor had got it wrong... I just hoped that there might be a way round it... never mind...I'll just find a bullet to bite!!!