Offsetting a loss against future years income

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    Offsetting a loss against future years income

    Hi everybody, this is my first post so forgive me if this seems like a basic question!

    I have just started renting out a property with my wife that we bought last year. We had no tenants (and therefore no income) in the last tax year as we were busy decorating & having damp proof work etc done.Our first tenants have just moved in in the last few days.

    My understanding was that the costs we incurred whist the property was empty (mortgage interest, purchasing costs, maintenance etc) can all be carried forward to future years and offset against the profits we will make now the property is occupied. However, I have just phoned HMRC and have been told that nothing that we incurred prior to the tenants moving in is deductible!

    Have I been advised right by HMRC, from what I have read this seems totally incorrect to me?

    Thanks for any help you can give on this as I am now very confused!

    HMRC are wrong to say "nothing".

    Your understanding is wrong too.

    1. Mortgage interest - deductible.
    2. Purchasing costs - capital (go into the CGT computation when you sell the house)
    3. Mortgage arrangement fees - deductible over life of loan. So £2,000 over a 20 year loan is £100 per annum.
    4. Major maintenance work shortly after acquisition of property. Probably capital.


      Have a read here :
      Regards Peter


        Thanks to both of you for that. Would I be right in thinking that there are no hard and fast rules as to what constitutes capital expenditure? If a damp proof course is replaced because the surveyor recommends it (presumably to maintain the property as habitable) would the cost of that not be able to be offset against future profits?


 and read the paragraph on "Repairs etc. after a property is acquired".

          In terms of your specific question, you are correct, the cost of that is not able to be offset against future profits.


            You mentioned that it was empty when doing the work but was it tenanted when you bought it?

            I think (or like to think) that certain things depend on whether the property has been rented out by you before you do the work. For example, if you buy an empty property and re-wire I think this is capital expenditure, but if you were to have it rented for 6 months and then re-wire it, this would be repairs and maintenance and thus deductible.

            Perhaps someone could advise if I am imagining the above rule?




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                Hi all,

                A friend of mine has been renting out a flat since 2004 and has not declared any of the income to HMRC in all that time.

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                Well done HMRC..

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                by armour
                Fair enough. Thanks for your advice. It is on cash basis.

                I guess it would only save her 50 odd quid anyway, maybe less than £80 once the fine and interest is added. I guess she'll have to swallow that.
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                by Santa Fe
                Boletus, thank you.
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                by jpkeates
                armour - Sorry, I don't know.
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                by armour
                Thanks JP, that's clear. I'll put the bathroom in with the income tax then. I guess it's much of a muchness anyway as the associated reduction in interest and fine will probably equal out.

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                The 10% was for furnishings, so built in stuff should be ok to claim.
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                by armour
                Seems pretty clear there JP. I'll go ahead and alter my calculations

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