How do I get the best return on my property?

Hi Andy

I don't know where you have been getting your information from but every single piece of advice you have referred to is completely wrong and could land you in very deep trouble.

Let's start with your losses. Refurbishment costs should NOT be offset against your rental profits. They are capital costs which can only be offset against any capital gains when you sell the property. If you have claimed losses on rental income and HMRC find out you will have a very big problem.

Your mortgage has nothing whatsoever to do with Capital Gains Tax. This tax is charged when you sell the property. Your gain is calculated taking the sale price of the property MINUS the amount you paid for the property and any costs of refurbishment and selling costs. This is how you arrive at the gain. You then deduct your CGT allowances and pay tax on the balance of profit.

I suggest you seek professional advice from a qualified accountant and a financial adviser before it is too late. Start with the accountant. You are probably going to have a hefty tax bill but it's far better to deal with that sooner rather than later, otherwise you will have fines to pay on top of the tax due. You will then know whether you need to raise any money when you speak to the Financial Adviser.

Please DO NOT underestimate the mess you are in. If you bury your head in the sand and do nothing your predicament will get far worse!

Please see >>> http://www.property118.com/professional-adviser-introduction-request/

I also recommend you to read my property investment strategy which you will find here >>> http://www.property118.com/how-to-become-a-landlord/60765/
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I hear what you are saying.
There has only been 2 tax returns sent in from a local accountant who done my tax returns

In the section Property expenses he included all legal and management fees, property repairs, loan interest and other financial costs... included the income of the property and gave the final figure of -£21330 and this loss has been carried forward into the second year (by Loss Brought forward used against this years profit) This left about -£19,114 with again no tax being charged due to this....

Are you saying that you are liable for tax as soon as the property is let, regardless of weather you are minus £10,000 for doing it up for example?

I think i need to change my accountant!

Reply to the comment left by "Andy " at "24/11/2013 - 17:31":

Refurbishment and repairs are two different things. Is your accountant insured? You may well have a claim against him/her for professional negligence.

If you repair a boiler or a leak whilst you have a tenant in occupation it's fine to post those expenses as repairs. However, a £20k plus refurbishment counts as improvements to the property and should be posted as such. Improvements increase the base cost of your property, they do not get ofset against rental income to create rental losses.

You really need to get a better accountant and also a decent lawyer. Based on what you have said you may be able to claim compensation towards any HMRC fines you might get as well as the costs of having your accounts done properly. I could probably organise the negligence claim for you on a 'no win no fee' basis.
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Reply to the comment left by "Andy " at "24/11/2013 - 17:31":

I wanted to add, that during the first year the accountant done it this way as the property was uninhabitable (council didnt charge council tax ) and those costs were needed to bring up to living standard which i'm sure HMRC said there were exceptions for uninhabitable properties.

Sorry both I think you need to consider an excellent book by Carl Bailey on the subject. Your understanding is not quite as clear cut as the comments suggest.

You need to ask your self if, you are already a landlord letting other property. What items are capital expenditure and what items are qualifying revenue expenditure (including what extra statutory concessions apply).

The rules on what is capital and what is revenue is not as clear cut as one would like. It has to be looked at item by item.

Hi,
Yes I have been told by the accountant that even if the repairs are substantial, that does not of itself make them capital for tax purposes, providing the character of the asset remains unchanged, for example if a fitted kitchen is refurbished, providing the kitchen is replaced with a similar standard kitchen then this is a repair and the expenditure is allowable. They advised me if additional cabinets are fitted or extra equipment is installed then this element is capital addtion and is not allowable.....

this particular property I purchased was in an uninhabitable state. all like for like items were replaced which I was told was allowable.

I am meeting my accountants tomorrow morning so will ask their opinion, they are landlord taxation specialists.
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Thanks mark,
this accountant is making out it is the interpretation of the HMRC on my expenditure.. but i understand what you are saying as well...

:/
really confused and I am definitely seeking advice

Is there not also the question of whether work was done to get the property ready before it is first let rather than once it has been first occupied by a tenant?

Reply to the comment left by "Andy " at "24/11/2013 - 21:59":

Hi Andy

I have just got back from my accountants. Rather embarrassingly for me, my accountant agrees with your accountant. Oh well, we live and learn! I'm obviously pleased for you though.

With regards to making repayments on your mortgage, please see >>> http://www.property118.com/landlords-buy-to-let-property-investment-strategy/interest-only-vs-repayment-mortgages/
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