Lease extension and tax

wheelz

I am about to complete my tax return and thought I could claim my legal fees for the extension of the lease for my flat on the tax return. But I understand if the lease is longer than 50 years this does not apply. Is there another way of claiming it, maybe when I do next year's tax return when I include the capital gains tax of the sale of my flat? Or would the same apply only if 50 years or less?

SmashedAvacado

I believe that they will be seen as a capital cost and as such the cost of the extension and legal fees can be offset against capital gains taxes. I wasnt aware that 50 years was the magic number but what you are doing relates to capital not operating costs.

00ec25

SmashedAvacado wrote: »

I believe that they will be seen as a capital cost and as such the cost of the extension and legal fees can be offset against capital gains taxes. I wasnt aware that 50 years was the magic number but what you are doing relates to capital not operating costs.

50 years is a very magic number since it defines a short lease

a short lease is classed as a wasting asset and is subject to special rules
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71140

wheelz

00ec25 wrote: »

50 years is a very magic number since it defines a short lease

a short lease is classed as a wasting asset and is subject to special rules
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71140

I though it was extending the lease by 50 years. Never mind. This is a useful link to the Capital Gains guidance. Completed yesterday, money currently being moved to where I want it to be, tax return for rental income to be done today, my tenant paid here last rent just before the end of the tax year this April so that is only Capital Gains tax left (hopefully with some off-setting of lease extension costs) and then this whole episode with my flat I once lived in and then rented out when I moved in with my partner, now husband is over.

wheelz

For the capital gains and lease extension I'm probably gone seek help from a tax adviser. Do I understand it right that capital gains tax can be/is done separately from tax return? Next tax year (18/19) I should haven't to do a tax return as no longer have rental income. I was about to do the tax return for the tax year 17/18 for which I had rental income. Does that make sense to split it up as I can do this this tax return myself while I probably need advice for the capital gains bit. Or is it there somehow a disadvantage if I split it up? Then I can get it all done soon/this year.

wheelz

Just to help others. I called HMRC today and spoke to 3 different people, eventually a tax inspector. They were so helpful. For Capital Gains tax you can just go to https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

Then go to the section: "Report your gain and pay straight away" There you will find a link to the correct webpage to report the Capital Gains Tax if you like me don't have a tax return to do. It basically takes you to the Government Gateway section for Capital Gain. As far as I understand it. It says: When you use the service you’ll need to upload PDF or JPG files showing how your capital gains and Capital Gains Tax were calculated.

The Tax Inspector advised that I should just have a go and if I get stuck ask for a technical adviser when ringing HMRC. So I hope I might be able to save money and don't have to go to a tax adviser. Result.

Oh and costs for lease extension go with Capital Gains tax as already stated. Tax return for last year (I sold flat in this tax year) is separate and I can just go ahead with that as normal.