Buy to let - Help, advise required please

herbiecat_2

We bought a house to let in October last year and it has been empty because we are in the process of doing it up before we can let it. Do I have to declare my expenses to the tax office even if I did not have any income?
Also, how can I get advice on how to claim back the expenses we are incurring now ? (eg. changing leaking hot water tank, plubing and electrical work, new kitchen - the old one was mouldy and not usable, new windows - surveyor adviced us to change as wood is rotten outside etc.). These are not improvements to the house as such, but necessary works.

Any help and advice is very much appreciated. Thank you!!

Jowo_2

Landlordzone has a taxation forum with tax experts as members.

They may be able to better advise you which of these are capital expenses and which are revenue expenses that can be offset against future rental income and which expenses you can claim before the rental commences.

Here is an article that indicates you cannot submit those expenses

"Repairs required to a newly acquired property that where necessary before the property could be brought into use will form part of the capital costs and therefore are not deductible expenses."

http://www.landlordzone.co.uk/tax/deductible-expenditure


If I understand the following article correctly, you cannot claim for the kitchen (as you could not let the property out until it was done).

http://www.property-tax-portal.co.uk/taxquestion58.shtml

I've read before on forums that the rule of thumb is that the deductible expenses are valid from when the property is ready to let, not before - ie the landlord cannot claim for expenses associated with refurbishing a property ahead of the rental.

Therefore if that interpretation of the HMRC tax rules is valid, its irrelevant whether the expenses are for repairs rather than improvements because that distinction only applies after the property is marketed for letting.

herbiecat_2

Thank you, but does anyone think that I should submit a tax return now even if I haven't let the house yet?

poppysarah

You will have to do one but you don't do them right now.

Keep records of all your spending - and whether it's essential works or a repair when you have a tenant in.
There's a difference in how you put them in the accounts - one is capital investment I think and the other is tax deductable.

Examples of non deductible capital expenses are:·

• Expenditure that adds to or improves the property·
• The cost of refurbishing or repairing a property you bought in a run down or derelict state·

Examples of repairs that are normally deductible in calculating rental profits:

• Exterior/interior painting and decorating
• Stone cleaning·
• Damp and rot treatment
• Mending broken windows, doors, furniture and items like cookers or lifts
• Re-pointing·
• Replacing roof slates, flashings and gutters·
• Replacing lead pipes with plastic pipes·
• An allowance for wear and tear may be made

I'm not sure who you're planning on claiming back the expenses you've had so far from though.


Speak to an accountant about your accounts and you will need to tell HMRC that you need to fill in a tax return and they will send you the forms.

tbs624

Get it straight from the horse's mouth - see HMRC's PIM ( Property Income Manual) here

Join one of the national LL associations ( RLA or NLA) and/or LLlaw - tax deductible membership fees, discount on your LL insurance and much useful guidance.

herbiecat_2

Thank you all. One thing that I am unclear on is the following. I have bought this house to let but I haven't let it yet as I am working on it. I bought it during 2009/2010 tax year which is just finished.

Do I have to do a tax return for this year even if I haven't let the property (so I had only expenses, not income)?

Thank you all again.

silvercar

In the normal course of events you would do a tax return to record the loss. You would then carry forward the loss to the next tax year to put against rental income. BUT as expenses before letting are not generally allowable, you cannot claim these as expenses of the letting business and therefore there is no reason to include them in a tax return. Presumeably you bought the property at a price that reflected its condition and the work that needed doing.