Taxable compensation awarded to LL by deposit schemes

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Taxable compensation awarded to LL by deposit schemes

    I can guess the answer, but is compensation that is awarded to LL's by the various deposit schemes taxable as income?
    Another long suffering LandLord

    #2
    Yes probably, I suspect...

    It ain't "compo" but either for unpaid rent or damages...

    If unpaid rent then landlord is only getting the INCOME (the clue is in the tax name - "Income Tax"..) he was expecting.... No better or worse off if he had the rent paid in the normal way, to be declared in the normal way. I've a feeling HMRC expect "rent" to be reported as "rent due" anyway, if not paid then "bad debts" under "other" in expenses make an appearance...

    If damages (say broken table..) LL gets % of new cost (after "fair wear 'n tear").. of, say, £250. Assume furnished so can't claim for new table against tax.. I'd say they LL should be taxed.. but I'm not sure..

    Is there a reason (eg you have such a situation..) for asking or are you merely doing research as a student, desperate to learn, trying to understand the business?? When you asked HMRC what did they tell you??

    Cheers!
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      It depends on a number of things.

      Compensation for the reduction in the value of the property is effectively income; repair costs are usually allowable.
      Replacement furnishings (including carpets and curtains) are tricky if renting non-furnished.
      If you're renting furnished, using the 10% allowance and the compensation is for furniture, it's income.

      Rental income "replacement" depends on how you do your tax return.
      If you do your return on the cash basis, it's income.
      If you do your return on the normal basis it will depend on how you treated the bad debt being compensated.
      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


        #4
        jpKeates---Many Thanks
        Another long suffering LandLord

        Comment


          #5
          It is all taxable income, though the money you receive for damage can in general be compensated by the expense of fixing it.

          Rent received through the deposit is also obviously income:

          If you use the accrual basis you already accounted for it, so the money you receive from the deposit is only offsetting your debtors account. Though, as jpkeates mentioned, you might already have written it off (which is poor accounting but a way to avoid paying tax on income that hasn't been paid), in which case you account for it again when you receive it from the deposit.

          If you use the cash basis then you account for it when you receive it from the deposit.

          The only difference you could end up with is therefore the tax year the rent is accounted for.

          Comment


            #6
            Interesting, earlier this year I received deposit compensation for a wrecked carpet in one of my unfurnished properties, I didn't declare this as income on the basis I can't offset the cost of the replacement carpet against tax anymore.

            Was this incorrect then??

            Comment


              #7
              Yes.
              It's income and taxable.

              Then you can't offset the cost of the carpets.

              The second part of that doesn't affect the first - you may not have actually bought any carpet, any carpet you did buy is not allowable.
              And you pay tax on all of the income.
              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

              Latest Activity

              Collapse

              • Reply to Any property tax experts you can recommend please?
                by Trevor62
                Thank-you for the link.

                Well my issue is Tax & Assets.

                Firstly, I am in the process of building a house in my side garden, when complete I will own two properties.

                Will I have to pay stamp duty for the new build?

                Because I am an old dad and my...
                19-05-2022, 19:44 PM
              • Any property tax experts you can recommend please?
                by mpppen
                Hello,
                We have a small BTL portolio of five properties. Some are in our personal names and the latter ones in a property company we set up a few years' ago when the tax rules changed.

                I'd really like to find someone who can advise us of the best way of either bringing the personal...
                03-03-2022, 20:00 PM
              • Reply to Capital Gains Tax dilemma
                by Gordon999
                You have owned the property for 38 years ( 1984 - 2022 ) and lived in the property for 22 Years ( 1984-2006 ) plus 16 years for letting..

                The total capital gain over 38 years is apportioned between "residence period" ( exempt for cgt ) and "letting period" ( liable...
                19-05-2022, 10:07 AM
              • Capital Gains Tax dilemma
                by Ollyn
                Hello

                I am considering whether to sell my house which has been let for some time and need to see how I can best deal with CGT.

                I lived in the property from 1984 until 2006.

                From 2006 it has been occupied by tenants, now vacant and being renovated.

                ...
                18-05-2022, 18:17 PM
              • Reply to Capital Gains Tax dilemma
                by ash72
                You should seek advice from an accountant, or a property tax for tailored advice to your specific circumstances, you may be entitled to some relief if the property at any time was your own principal residence.
                18-05-2022, 21:14 PM
              • Reply to Capital Gains Tax dilemma
                by theartfullodger
                You declare (online) and pay CGT within 60 days of sale. Depending on the numbers I would expect you to pay CGT. What records do you have of applicable costs, etc?

                What you pay will depend on what CGT rules when you sell - v unlikely to be better than today, possibly worse. Covid,...
                18-05-2022, 18:29 PM
              • Reply to Tax Allowance on Rental Income.
                by Gordon999
                The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property.

                If you own a property jointly with others, you’re each eligible for the £1,000 allowance against your share of the gross rental income.

                If your annual gross...
                18-05-2022, 16:47 PM
              • Tax Allowance on Rental Income.
                by banner257
                Can anyone help please, if a rental property is owned by two people 50 50. Would each owner be allowed to claim tax relief of £1000 each, or will the allowance of £1000 be split 50 50.
                Thanks
                18-05-2022, 08:42 AM
              • Reply to Tax Allowance on Rental Income.
                by jpkeates
                It's £1,000 each.

                Most landlords don't use this though, because it's rare for income from a rental property to be low enough to qualify,
                18-05-2022, 09:59 AM
              • Consent to Let - do we still need to pay tax
                by VIKKI99
                Hi, For kids school - we need to let out our Own House and move to a rental property close to school.
                The rental money I receive from my tenants is exactly same as rent I pay on my property where I am a tenant.
                Question : Rental money I receive from Tenants - should it be considered as income...
                18-05-2022, 01:07 AM
              Working...
              X