What sections in self assessment expenses

legepe

Hi all,

In the self assessment online website there are the following sections within - Expenses for other property income
1.Rent, rates, insurance, ground rents etc:
2.Loan interest and other financial costs:
3.Legal, management and other professional fees:
4.Costs of services provided, including wages:
5.Property repairs and maintenance:
6.Other allowable property expenses:

Can anyone please tell me if Im putting things in the correct sections?

1 Insurance
1 Council tax
1 Electric
1 Gas
1 Water
? valuation fee
? mortgage account fee
? Mortgage broker fee
2 Loan interest
3 Agency fee
5 Kitchen
5 Bathroom
5 Plumbing
5 Materials
5 Plastering
6 Tools
6 Gas safety check
6 Office cost

I dont know what section to put down costs to remortgage - valuation fee? mortgage account fee? mortgage broker fee? Do these go in 6..?

Thanks
legepe

Mahsroh

I would lean towards 3 for those with a question mark under "other professional fees", but 6 would probably work too.


I don't think it matters too much - it all gets lumped into the same "expenses" pot at the end of the day - with the exception of number 2 (from this tax year onwards). When I used to use an accountant we had a disagreement once over where something should be allocated. He sent me a form that he'd completed and had certain fees in one box, and I'd got them in the other. He was pretty laid back about it when I spoke to him and said "it could go in either"!

Pennywise

If it's a new purchase, then the professional fees (valuation, mortgage, agents, broker etc) aren't allowable as they're capital.

"Professional fees are not allowable if they are capital or they are not incurred wholly and exclusively for the purposes of the rental business. Generally, the fees are capital if they relate to a capital matter, such as the purchase of property.

The expenses incurred in connection with the first letting or subletting of a property for more than one year are capital expenditure and therefore not allowable. The expenses include, for example, legal expenses (such as the cost of drawing up the lease), agent’s and surveyor’s fees and commission."

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2205

Likewise your bathroom and kitchen costs may not be allowable:-

"Where the rental business is letting property, the business can’t begin until the first property is let. You need to distinguish between activities that are preparatory to letting and those business activities that are part of letting."

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2505

If the property was run-down upon purchase and therefore bought at a discount, the "building" costs to bring it up to standard aren't usually an allowable expense.

So, re most of your list, it all depends on whether the property is your first rental property, when you bought it, the state it was in when you bought it etc.

If not allowable as an expense, the costs are carried forward as capital to set against future capital gains tax upon eventual sale.

legepe

Ok thanks for info... It is not my first rental property.. Just one more thing.. Ive used the simplified method of entering information on the online self assessment.. should I have used the more detailed method, and if so could you explain..

legepe

Pennywise wrote: »

If it's a new purchase, then the professional fees (valuation, mortgage, agents, broker etc) aren't allowable as they're capital.

Theres a section from the hmrc property tools guide which states expenses are allowable? https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/652420/Property_Rental_toolkit_17.pdf

10. If expenditure incurred prior to the commencement of the rental business has
been claimed have all of the conditions been met?
Risk
Expenditure incurred prior to the commencement of a rental business is allowable if it is
incurred wholly and exclusively for the purposes of the rental business and it is not capital
expenditure. In addition, the
conditions
must be satisfied for the relief to be due on expenditure
incurred before the start of the rental business.
Mitigation
Consider any expenditure on activities that are preparatory to letting. Ensure the expenditure
meets the conditions noted below.
Explanation
The date of commencement is a question of fact. Where the rental business is letting property,
the business normally begins when the letting of the first property begins and not on the date
the property is purchased. Relief may be due on expenditure incurred before the start of the
rental business if it satisfies all of the following conditions:

it is incurred within a period of seven years before the date the rental business is started

it is not otherwise allowable as a deduction for tax purposes

it would have been allowed as a deduction if it had been incurred after the rental business
started
Qualifying pre-commencement expenditure is treated as incurred on the day on which the rental
business commences.
For further guidance see
PIM2505
.

BoGoF

I thought I recognised the name and scenario.

As I said in your other thread you need an accountant to do this for you. Don't want to sound harsh but if you don't know the difference between revenue and capital expenditure you are going to get this badly wrong.

legepe

BoGoF wrote: »

As I said in your other thread you need an accountant to do this for you. Don't want to sound harsh but if you don't know the difference between revenue and capital expenditure you are going to get this badly wrong.

Sorry if it sounds like im posting more than the same thing twice..
There are two different issues.. which I maybe should have made more clear..
1 was the back dating of tax for year 14/15 which was my first property purchase and I understand that financial costs of acquiring a property are capital because its my first property rental... other costs associated with the property are allowable but under cirtain guidelines. this will be looked at with an accountant after later on this year
2 the cost ive incurred for further property purchases and associated costs of repairs to those properties in years 15/16 and 16/17
This post was relating to 2
I simply wanted to know where to put those cost in the online self assessment. I realise now it should be in - Loan interest and other financial costs:
I would still like to know though if it would be better to use a more detailed method of entering the information rather than the simplified method? and if so what are the reasons?
Sorry if ive caused any confusion

Pennywise

legepe wrote: »

Theres a section from the hmrc property tools guide which states expenses are allowable? https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/652420/Property_Rental_toolkit_17.pdf

10. If expenditure incurred prior to the commencement of the rental business has
been claimed have all of the conditions been met?
Risk
Expenditure incurred prior to the commencement of a rental business is allowable if it is
incurred wholly and exclusively for the purposes of the rental business and it is not capital
expenditure. In addition, the
conditions
must be satisfied for the relief to be due on expenditure
incurred before the start of the rental business.
Mitigation
Consider any expenditure on activities that are preparatory to letting. Ensure the expenditure
meets the conditions noted below.
Explanation
The date of commencement is a question of fact. Where the rental business is letting property,
the business normally begins when the letting of the first property begins and not on the date
the property is purchased. Relief may be due on expenditure incurred before the start of the
rental business if it satisfies all of the following conditions:

it is incurred within a period of seven years before the date the rental business is started

it is not otherwise allowable as a deduction for tax purposes

it would have been allowed as a deduction if it had been incurred after the rental business
started
Qualifying pre-commencement expenditure is treated as incurred on the day on which the rental
business commences.
For further guidance see
PIM2505
.

See the bit I've emboldened and coloured Red - that's your answer.

legepe

Ok thanks, I do understand the difference between capital and income based expenditure.. However, it does not seem to be that clear where to enter some things in the self assessment. I havent included items that make any improvements, Ive only included things that are replacing an item that was already there or that needed a repair.. insulation, damp proofing.. I understand that even though its an upgrade I am able to claim for central heating replacements so I will in my 17/18 claim for this on my next return. unless that is classed as capital?
Thanks for your input...
legepe

Mahsroh

legepe wrote: »

I understand that even though its an upgrade I am able to claim for central heating replacements so I will in my 17/18 claim for this on my next return.

Depends on the specific scenario. If an "upgrade" or "Improvement" is to bring it up to "modern standards" then it's typically allowable. For example, replacing single glazed windows with double glazing (which is actually the example HMRC use). Chances are a central heating system would probably be allowable (for example, replacing an old boiler with a modern, more efficient one) but if there is even the slightest doubt, I'd speak to HMRC or seek advice from an accountant.

Pennywise

Mahsroh wrote: »

Depends on the specific scenario. If an "upgrade" or "Improvement" is to bring it up to "modern standards" then it's typically allowable. For example, replacing single glazed windows with double glazing (which is actually the example HMRC use). Chances are a central heating system would probably be allowable (for example, replacing an old boiler with a modern, more efficient one) but if there is even the slightest doubt, I'd speak to HMRC or seek advice from an accountant.

But if that kind of work was done prior to letting, because the property was purchased in a poor state of repair, it wouldn't be allowable - it would be capital to reflect the spending is merely in lieu of the discount it was bought for due to it's poor condition. The devil is in the detail and the full circumstances need to be looked at.