Car allowance or mileage - rental property

arfur

I have a few questions which I have listed separately as they cover different topics.

I have been advised that I can either offset mileage costs at 40p per mile against Capital Gains (before property is let) or income tax (once property is let), to and from the property. Or I can offset cost of car, tax, servicing, petrol (do I need receipts?), decide portion that relates to business and then take 20% allowance to offset against rental income.

Does anybody have any suggestions which is better from a tax perspective (thinking long term).

TM1976

I think it would be difficult to justify 20% of your mileage for a rental property, either way you need to keep a mileage record to back it up.

You may be able to claim against capital gains only in as far as recording the costs of making capital improvements to the property.

arfur

Hi, I am keeping a mileage record so comfortable in claiming the 40p per mile and offsetting against rental income from the time the house had started to be let and capital gains before that.

But accountant suggested could instead of claiming mileage could calculate cost of car, servicing and petrol and tax, allocate an amount for business use and then take 20% of that allocation to offset against the rental income. Is it easier and more beneficial from a tax perspective to use the pence per mile as opposed to cost allocation?

TM1976

arfur wrote: »

Hi, I am keeping a mileage record so comfortable in claiming the 40p per mile and offsetting against rental income from the time the house had started to be let and capital gains before that.

OK but your time spent travelling before the house was let will not be completely relating to your capital gain.

arfur wrote: »

But accountant suggested could instead of claiming mileage could calculate cost of car, servicing and petrol and tax, allocate an amount for business use and then take 20% of that allocation to offset against the rental income. Is it easier and more beneficial from a tax perspective to use the pence per mile as opposed to cost allocation?

It depends how much your car costs to run, however I would suspect that it would be difficult to justify that 20% of your mileage related to the property, especially once it was let. Reference to your mileage record should let you know what the actual split was. Your split should be based on your actual usage percentage there is no basis for claiming 20% unless it can be supported.

ManicMum

sorry to butt in here. I have a rental property 500 miles away and we went there for a week to do maintenance. I asked if could claim the 1000 miles at 40p mile ie. £400 but was told not allowed. This was from accountant friend. Are you saying that you can claim costs of going to your property? Cheers.

To OP - I would just claim the 40p a mile. Sounds a headache to do it the other way around. I'm no expert though.

TM1976

Yes this is claimable see the link:

http://www.hmrc.gov.uk/manuals/pimmanual/PIM2210.htm

ManicMum

thanks TM1976. We stayed with family whilst on our maintenance trip so guess the Revenue would not look upon this favourably.

TM1976

ManicMum wrote: »

thanks TM1976. We stayed with family whilst on our maintenance trip so guess the Revenue would not look upon this favourably.

If the reason for your trip was to do maintenance it was a business trip if it was to visit your family it wasn't.

Stopping with your family in itself is not a problem, in fact it is commercially justifiable as it saves on hotel costs etc.

ManicMum

cheers. I read that link you sent me and it said if you got any personal gain from it then it wouldn't count. Guess it was a double whammy really. Husband spent the week at the property and I spent half my time helping him and half doing things with my folks. £400 quite a big expense so don't want anyone questioning us on it so need to make sure it's water tight! you reckon it is?

TM1976

Chances are you won't be asked about it but don't destroy your case if you are. I would say that visiting your family was incidental, you would have incurred the expenses anyway if you chose not to visit them.

ManicMum

cheers for that. will put it down. you are right. we would have had to go anyway as cost of employing a contractor would have been dearer than doing it ourselves. are you an accountant?