Property Letting Loss

Axel

Hi,

We have a property for let which lay empty for a good part of the last tax year due to extensive renovation works. The net result is a loss for the year as the expenditure exceeded the income.

Can this loss be carried forward into the next, or back into the previous, tax year when the property was fully let?

This is a personal tax account and is not set up as a business.

Axel

ncthomas1

bit confused - you mention that the property was empty whilst renovations took place. Why would the cost of those renovations become included as part of the "loss"

Only expenses incurred whilst the property whilst tennanted are allowable for tax relief so I am not sure how you mean they have been included and form the loss?

If I am misinterpretting your question, apologies, may be you could explain more?

ceeforcat

ncthomas1 wrote: »

bit confused - you mention that the property was empty whilst renovations took place. Why would the cost of those renovations become included as part of the "loss"

Only expenses incurred whilst the property whilst tennanted are allowable for tax relief so I am not sure how you mean they have been included and form the loss?

If I am misinterpretting your question, apologies, may be you could explain more?

I am not sure that you are correct in your argument - the second paragraph is simply incorrect in my view -see below:
http://www.hmrc.gov.uk/manuals/pimmanual/pim2505.htm

We also need clarification as to whether the property was let before the repairs were carried out.

The main argument to me is whether the 'repairs' are capital or revenue in nature.

happycamel_2

It's possible they've made a loss just on mortgage interest, professional fees etc vs rental income rather than after they've added in the cost of any improvements (improvements aren't tax deductible).

To answer the basic question, if you've made a loss this year (rental income minus allowable deductions) you pay no tax and you can carry forward the loss against future years when you make a profit.

Axel

To clarify:

The property was previously rented out and was trashed by the tennant. The cost of repairs, the time they took and then the time the property lay empty before re-letting resulted in a loss for that year.

Axel

ceeforcat

Axel wrote: »

To clarify:

The property was previously rented out and was trashed by the tennant. The cost of repairs, the time they took and then the time the property lay empty before re-letting resulted in a loss for that year.

Axel

Under those circumstances, such repairs should be allowable.

chrismac1

Loss relief is pretty rubbish - carry forward against next available rental profits from same type of property.

I agree with ceeforcat that it is likely that all - or at least the majority - of your costs will be fully claimable as a trading expense as there is unlikely to be any improvement element.

I always document such expenditure - and the basis for claiming it - thoroughly so that if the need arises in 5 or 6 years' time we can quickly respond to an initial HMRC enquiry with the reasoning.

AlexMac

I'm not an expert- or even particularly well-informed, but last year I made and declared a loss on my rental property, despite it being tenanted, because of high allowable expenditure, including the fact that the Council freeholder did a major maintenance job (replacement/ renewals-not a capital improvement).

The online self-assessment tax form and notes (which being a Know - it all- smart-!!! I've already done for last year) lead me to believe that this loss will carry over to next year's property account, and reduce my net tax accordingly.

ceeforcat

AlexMac wrote: »

I'm not an expert- or even particularly well-informed, but last year I made and declared a loss on my rental property, despite it being tenanted, because of high allowable expenditure, including the fact that the Council freeholder did a major maintenance job (replacement/ renewals-not a capital improvement).

The online self-assessment tax form and notes (which being a Know - it all- smart-!!! I've already done for last year) lead me to believe that this loss will carry over to next year's property account, and reduce my net tax accordingly.

Yes - you are correct. There is no other option for property losses.