Allowable expenses on property income

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    Allowable expenses on property income

    Hi,

    Are the following costs allowable (tax deductible) expenses on property income?

    1. Accountant fees for compiling and submitting my self assessment every year.

    2. Legal fees for transferring the ownership of the property from my sole name to joint names (with spouse).


    I am getting conflicting information (worryingly from my accountant) as he believes the above are NOT allowable expenses on property income but general reading on the web would suggest otherwise.

    Thanks,

    Landlord 123!



    #2
    If the property is let or about to be let, 2 is definitely allowable.

    1 is debatable.
    It's something that everyone does (including me), but it probably fails the solely and exclusively test, so it probably shouldn't be allowed.
    For many people, the need for it arises as a direct consequence of the letting business existing, but it's still a personal matter.
    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
      I am not sure I agree on the legal fees for transferral jp.

      Take spouse part out of it as that complicates it. If I were to transfer part of a property to my friend, that cost of transfer would be capital and offset against later capital gains. Not really different from selling the whole property - solicitors costs for the sale would not be offset against rent during that year, but against capital gain. The spouse issue complicates it only slightly as the receiving spouse would later pay CGT on any sale - if only one solicitor is involved the question would be whether they are acting for transferor or transferee or both (probably for the transferror).

      In the accountancy fees for tax return, I agree it fails the exclusivity test .... but perhaps if the ONLY reason a tax return has to be completed at all is rental income one could make a case. Since the requirements for "who has to submit a return" are clearcut this should be clear.

      Comment


        #4
        The Notes for SA105 Tax return gives the expenses for entering in box 27 as shown below :

        Box 27 Legal, management and other professional fees

        You can claim:
        • management fees paid to an agent for rent collection, advertising and administration
        • legal and professional fees for renewing a lease (if the lease is for less than 50 years)
        • professional fees paid to evict an unsatisfactory tenant in order to re-let the property
        • the costs of appealing against a compulsory purchase order

        You can’t claim:
        • any costs for the first letting or subletting of a property for more than a year
        • the costs for agreeing and paying a premium on renewal of a lease
        • any fee paid for planning permission or registration of title on property purchase

        Here is my view of the rules :

        So Accountant bill for calculating profit from BTL income & expenses can be claimed as professional fee in Box 27.

        The legal fees ( for taking professional advice incurred for BTL property ) can also be included in Box 27.

        But the registration cost charged by Land Registry to register in joint names cannot be claimed.

        Comment


          #5
          Originally posted by Gordon999 View Post
          But the registration cost charged by Land Registry to register in joint names cannot be claimed.
          Correct. And not legal fees relating to this aspect either.

          Comment


            #6
            I don't see that.

            A fee paid to a solicitor for legal advice or for conveyancing is not a "fee paid for ...registration of title on property purchase".
            That's something that would be paid to the land registry.

            It's an anomalous exception in any case, because I think it's trying to stop people claiming a capital allowance against income, and doesn't accommodate the situation where the change is being made other than on initial acquisition.
            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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