Does retained damages deposit count as income for tax purposes?

[armour]

Hi all,
I had to evict a tenant during FY19-20 - thankfully, my first eviction in over 20 yrs of letting property. Together with owing about 6 months rent and the costs of eviction, she left the place in a right state which cost me more than her security deposit (which the letting agent gave me) to put right.
As the deposit money was spent wholly on putting right damage that she had done, does it count as income for tax purposes?
Thanks, Chris.

[jpkeates]

Yes.

For the avoidance of doubt, your claim against the tenant isn't limited to the deposit and you could pursue them for any loss greater than the deposit amount.
Anything successfully collected would also be treated as income.

[armour]

Thanks JP, I had a feeling it would. BTW, do you know anything about the tax treatment of funds spent on extending a leasehold? Last year I completed on a leasehold extension which cost me about £17,000 - just before these new rules. I know this expense is not allowable against income tax but is it allowed against any future gapital gain I may make and, if so, do I need to do something to claim, or register this relief?
I seem to remember telling the tax office how much I paid for the flat.

[jpkeates]

The cost of the leasehold extension is allowable against the gain when sold.
You don't need to do anything now to register the relief - just keep evidence of the costs just in case.

That's based on the regulations today - the rules might change over time.

[armour]

Thanks JP. Much appreciated