Nichola Ross Martin's Tax Consultancy

Questions

Responses

Has the 5 April basis period been applied?

Have all gross rents and other receipts from land and property been included as property income?

• If a sum is received net of expenses declare the income gross and the expenses separately.
• Ensure that lease premiums are treated correctly.

Have any deposits received been included as income as appropriate?

• Tax treatment of deposits follows Generally Accepted Accounting Practice.
• Bonds are not taxable

If a jointly owned property is let, has the profit or loss been divided correctly?

• If married and the legal title is in joint names, split profits or losses 50:50 unless a joint property election has been made.
• If unmarried, the allocation of profits or losses depends on beneficial ownership.
• If the property business is conducted as a commercial partnership declare profits on partnership return and on each partner's return.

If there are overseas rental properties, have the profits or losses been treated as income of an overseas property business?

• Do not mix income and expenditure from an overseas property business with those of a UK property business.

If there is commercial letting of furnished holiday accommodation in the UK or EEA have all the qualifying conditions been met?

If surplus business premises have been let, and the rent receivable treated as a business receipt have all of the conditions been met?

If expenditure incurred prior to the commencement of the rental business has been claimed have all of the conditions been met?

• Expenditure incurred up to 7 years prior to start of first rental.
• Providing it would have qualified if incurred after commencement of rental.

Has capital expenditure been reviewed for capital allowance claims?

• Claims for capital allowances are restricted when assets are used in a dwelling house which is let as a property businesses.
• HMRC has released new guidanceon what it considers to be a dwelling house (this mainly affects student type accomodation).
• Capital allowances can be claimed on assets used in shared areas of flats or student halls of residence.
• Review any election made on the purchase of a new building and consider claims for lost allowances in shared areas.
• Does any expenditure in shared areas qualify for Enhanced capital allowances?

Have all the items of expenditure on the capital improvement, renewal or repairs of assets been treated correctly?

• Tax relief on improvements, renewals and repairs depend on both the timing and nature of the expenditure and, additionally tax relief may be restricted depending on whether the wear and tear allowance or replacement cost basis are being claimed.

Has all expenditure on essential repairs to a newly acquired property been treated correctly?

• This expendture may be treated as capital improvements, or it may be tax deductible under basic principles established by case law, see Repairs and renewals.

Has all expenditure on new or replacement of plant and machinery been treated correctly?

• The correct treatment depends on whether the Wear and Tear allowance, or Replacement Cost basis are being claimed, see below. 
• Identify and apportion, if necessary, between additons of new assets, renewals to fixtures, renewals to moveable plant and machinery, and repairs.
• Have any legal and other professional fees incurred in acquiring an asset been allocated appropriately?

If a 10% Wear and Tear Allowance has been claimed, has it been calculated correctly?

• The Wear and Tear Allowance only available if the property is furnished: but it is not available for qualifying furnished holiday lets.
• Either the Wear and Tear Allowance or the replacement cost basis may be used for each property. Once it is decided to use one basis they cannot be swapped year on year.
• The cost of renewals to (fixed) fixtures may be claimed in addition to the Wear and Tear Allowance.
• The cost of renewals to plant and machinery cannot be claimed in addition to the Wear and Tear Allowance.
• The cost of repairs to the property including repairs to fixtures and plant and machinery remains tax-deductible when claiming the wear and tear allowance, but subject to general principles, see Repairs and renewals.

Have any capital repayments been excluded from loan interest and other finance charges?

• No loan interest claim permitted if rent a room relief claimed.

Have other expenses been claimed correctly?

• Have any 'dual purpose' expenses been apportioned to disallow an appropriate amount?

If a vehicle has been used by a landlord for non-business travel, including home to work:

• Have only the costs of qualifying business travel been claimed,
• Have motoring expenses been claimed and taxed correctly?

Are all expenses claimed by the landlord for business trips wholly and exclusively for the purpose of the rental business?

Where the business engages workers such as cleaners:

• Has employment status been reviewed?
• Has PAYE and NIC been applied appropriately where necessary?

If there have been wages or salaries paid to relatives or connected parties are the amounts paid commensurate with their duties?

If a property has been let rent free or at less than normal market rate has any expenditure been restricted accordingly?

If Rent a Room Relief is being claimed does it meet the conditions for relief?

Has any income over the Rent a Room exemption limit been treated as taxable rental income and the appropriate method applied?

If a landlord is non-resident has tax been deducted from the rental payments?

• Letting agent or tenant is required to deduct basic rate tax.
• Tax is paid to HMRC and must provide the landlord with a certificate of tax deduction by 5 July following end of the tax year.
• Exceptions: no requirement to make deduction where rents are <£100 per week, or where HMRC confirm that no deduction is required.

If box 19 in the property pages of the Self Assessment return has been completed have the correct figures been included at box 18?

If there has been a disposal of a rental property has Capital Gains Tax been calculated appropriately?

Losses:

If claiming Rent a Room there is no loss relief, so consider electing to prepare property accounts on normal basis (no election required, just complete correct section of SA return).

Have only appropriate rental business losses been set against general income?

• Sideways relief only available in respect of capital allowances, certain agricultural reliefs and furnished holiday letting.
• Have any other rental business losses been set against the first available rental profits?