Start of Furnished Holiday Let

arealhighlander

Last October my wife and I bought a flat to start as a Furnished Holiday Let. We started renting in March 14.

I am unsure as to exactly what can be claimed as tax deductable up until the start of renting.

I spoke to a local accountant who deals with many local rentals, BnBs etc. who started by telling me - apart from the capital purchases such as sofa, white goods etc. (capital goods can be claimed for as an FHL unlike a normal letting) - all other expenses incurred prior to the first rental cannot be claimed as an expense.

The annual insurance, phone rental a year in advance etc. he says can be claimed from the point of first rental onwards.

My understanding is this is incorrect, according to the guidance in PIM2505 (http://www.hmrc.gov.uk/manuals/pimmanual/PIM2505.htm

"A taxpayer may incur expenses for the purposes of a rental business before that business starts. If so, they may be able to claim a deduction for them once the letting begins, (ICTA88/S401 or ITTOIA05/S57). Relief is only due under these special rules where the expenditure:

is incurred within a period of seven years before the date the rental business is started, and
is not otherwise allowable as a deduction for tax purposes, and
would have been allowed as a deduction if it had been incurred after the rental business started."

Therefore any insurance, painting, decorating, purchase of linen, bedsheets, etc. which would normally be allowable once the business was up and running would be allowable under the above?

I wouldn't seem fair that al the cost of setting up the business could not be allowed to be offset against the business profit. How could I start the rental business unless I had the flat kitted out beforehand?

booksurr

assuming the property was not your residential home before letting commenced then yes you are correct, such costs would be allowable under PIM 2505

arealhighlander

Sorry, yes, it has never been our resident. Don't understand why my accountant would say it wasn't.

Its looking like I will have to do my own tax return, no point in paying someone who is not going to get my accounts right!

Two items I am unsure about - I assume I can claim my legal fees to purchase the property as an allowable expense (as I was buying it to be a FHL).

Also, second, the flat is rented out via an Agent, who takes 15% of each booking. Again, I assume I can claim the Agents fee as a fee.

booksurr

legal fees for purchase are allowable against CGT not income tax

agent fees are allowable against income tax

https://online.hmrc.gov.uk/information/help?helpcategory=selfAssessmentFiling1112&affinitygroup=individual&helpid=PropertyExpenses

familiarise yourself with
https://www.hmrc.gov.uk/helpsheets/hs253.pdf