Self Assessment - Non Payment of Rent

harrispb

Hello Everyone and Happy Christmas,

This is my 1st post so let me know if I have done anything wrong.

I have a property which I rent out. However my tenant left without paying the last two months of rent which was owed prior to her moving out. I managed to trace her and got her to write and sign a letter acknowledging what she owed and a payment schedule. I have not received any money yet.

I am also filing my 1st Online Self Assessment Tax Return and was wondering if I have to include the full amount of annual rent or whether I would be able to deduct the amount still outstanding?

I would be EXTREMELY GRATEFUL of any assistance with this question.

Thank You

lr1277

My understanding is that you have to include total income received. You can't declare something you haven't received.

Also did you take a deposit? If so, did you return the deposit when the tenant left? If not, I would suggest that you include this as part of your income.

When did the tenant move out? The reason I ask is that you should only be completing a 2009/10 tax assessment now. I certainly wouldn't expect you to be completing a tax assessment for 2010/11 at this stage.

Just my thoughts.

harrispb

Hello,

Thanks for getting back to me!

I am filing my return for 2009/10. It is my first time so I am worried about making a mistake.

Thanks again

grey_lady

So the tenant left before 4th April 2010?

jimmo

Strictly speaking you should include all rent due for the year in question regardless of whether it has been paid or not. Then, as a separate matter, you can claim a deduction for bad debts written off.
Again, strictly speaking, if you hope to recover the rent arrears at some time in the future, you should not write them off and will have to pay tax as if they were received when due. Then, if in say 2 or 3 year's time, you reluctantly decide to stop chasing your former tenant for the rent arrears you would claim a deduction for bad debts written off for the tax year in which you make the decision.
That is a simplified version.
However if your lettings business is small (HMRC's definition of "small" is having gross rental income due of less than £15,000 pa) you can use the "cash basis".
If you use the cash basis you simply declare rents actually received and expenses actually paid out in the year. Simples.
If you can legitimately use the cash basis then all well and good but remember if you do get some or all of the arrears from your former tenant it will have to be declared.
If you cannot use the cash basis, and particularly with bad or doubtful debts, you should seriously consider engaging an accountant as soon as possible.
Details are here
http://www.hmrc.gov.uk/manuals/pimmanual/PIM1101.htm