Tax return advice needed

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    Tax return advice needed

    Hi,

    I purchased my first btl in January 2016 which I refurbished and tenants moved in April 2016. I have completed my tax return for 2016-17 and was wondering if it was possible to carry forward costs from a previous tax year as the money for the refurb was spent at the end of a previous tax year (15-16) with no income at that point?

    Any help and advice is much appreciated,

    Pete

    #2
    Refurbishment is complex - if it's betterment, it's a capital expense which you offset against any gain when you sell it.
    If you bought a property cheap and returned it to market state and value that would be betterment.

    If it's simply routine maintenance (or replacement of new for old) it's an allowable cost which you treat as being incurred on the day the first tenancy began.

    Or it's a combination of both.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Hi jpkeates,

      Thank you for the reply. The work done was to bring the property to a lettable standard. Am I able backdate this and claim the expense in the tax year 2016-17 when the work was completed in the 2015-16 tax year before I had an income from tenants?

      Cheers,

      Pete

      Comment


        #4
        I don't believe you can backdate, no.

        Unless you are carrying over losses, your income/allowable (non capital) expenses relate solely to the tax year in which they occurred. In other words, if you did not claim for expenses for letting property in the 15/16 tax year when you incurred them, then I don't believe you can claim for them now.

        Although you had no income from tenants that year, if you were marketing a property during that year, you could have claimed as your business had technically started then. That's what I would have done.

        I would just put this one down to experience.

        Comment


          #5
          ah... actually, check this out. You may be able to do this if you file before January:

          https://www.gov.uk/self-assessment-t...ns/corrections

          I would phone HMRC and see what they advise before I went to the bother of doing this. It may be nixed by things about your situation I'm not aware of.

          Comment


            #6
            Expenses are allowable for up to six years before starting letting.
            The business "starts" when your first tenant starts their first tenancy.

            So if it was your first property, the expenses are deemed to have been incurred on day one of the first let.
            Whether they're allowable at all against expenses is determined by the type of work (see many other threads),
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              I understood the OP to have already filed a tax return for the 15/16 year. If so, would it not be strange to claim expenses for that year in the 16/17 return when the previous return, which covers the expenses period, has no expenses listed? That's even if expenses up to 6 years prior are allowed.

              Obviously, I might be wrong about them already having filed.

              BTW, to the OP, jpkeates' comment raises an interesting point which is that if you already have property let and you incur expenses at any point for a further property you plan to let, you can claim those expenses before you have any lettings income on the second property. This is because HMRC consider all lettings to be part of the same business activity. Might come in useful if you acquire another property in the future while you let this one.

              Comment


                #8
                Originally posted by tatemono View Post
                I understood the OP to have already filed a tax return for the 15/16 year. If so, would it not be strange to claim expenses for that year in the 16/17 return when the previous return, which covers the expenses period, has no expenses listed? That's even if expenses up to 6 years prior are allowed.
                Unless the OP had other property let, the expenses aren't a business expense until the business starts, and therefore are simply personal expenditure until the status is changed by the start of the business.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  If this was/is the OP's first property then when exactly is the business deemed to begin? Surely if the property is bought with a BTL mortgage then the business should begin on the day the mortgage completes, or maybe even prior to that if your claiming for solicitors fees etc.

                  Comment


                    #10
                    If it was the landlord's first property, the business begins when the first tenant begins their first tenancy.

                    The existence of a BTL mortgage has no impact and doesn't create a business.
                    Any allowable expenses relating to the mortgage are claimable when the business begins as above.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      If the business starts with the first tenant how do you claim for income related expenses prior to that? Can you claim for interest relief etc prior to first tenant?

                      Comment


                        #12
                        If you have a lot of expenses to claim that may result in losses to carry forward for more that one year , try using an online accountant firm to do your tax return.

                        Comment


                          #13
                          Originally posted by Kape65 View Post
                          If the business starts with the first tenant how do you claim for income related expenses prior to that? Can you claim for interest relief etc prior to first tenant?
                          You claim it all as if it fell on the first day of your business, which is the first tenant in the first property.

                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                          Comment

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