Reasonable miscellaneous costs for landlords tax returns

@Tony Atkins

Thank you for absolving me of further criticism and comment with your point on the £208p.a. claimable allowance. I assume this is actual money and tax saved as if it is £208 allowance @ 20% = only £41 odd and hardly worth it.

The comments about not upsetting HMRC I find amusing and are why big firms pay such piddling tax in the UK - upset them and they'll end up not paying anything at all. My tax affairs have been horrendous over the years, dipping in and out of higher rate tax (marginally, the worst position of all) various benefits in kind and so on.

I really don't give a hoot about this tax issue because I am not a Landlord. I am a self employed consultant following 20 years of PAYE in the indusstry and as an alleged expert on the legal side the last thing I personally would ever be is a landlord, and I would never own property abroad either. All just too much potential hassle and downside for the benefits in my view, certainly if you have a portfolio less than 5 properties.

£450 a year I am very happy with. Those commenting on fees assumed I was a one property landlord I assume, I am not I am a s/e consultant whose financial affairs are not straightforward and last thing I need is a cock up with HMRC. As it is I have to remember to pay the bill later this month and that is pressure enough thank you.

On designating part of a home as exclusively an office I will re-check that point with my man - who I also know professionally anyway hence why I use him - but there are for certain definite drawbacks in doing so. One of them is tax relatedd, maybe not C Tax perhaps it is capital gains on a %age of the eventual sale price as it is not all used as main residence.

Don't know and don't care to be honest

Reply to the comment left by "Tony Atkins" at "07/01/2014 - 23:09":

Tony, thanks for taking the time to get back to me......exactly the sort of guidance I was looking for.

Kind regards

Paul

Hi Everyone

I was at a property meet last week. Where the guest speaker was Ian Wallace who has written a book on property tax. He gave some good advice through his presentation.

I think he said you should keep a record of all journeys to view properties or inspect your properties. up to 10,000 at 45p after that 25p.

Also while doing this you can claim for food if your are more than 15 mile from home. Keep receipts.

Flights / Ferry tickets as I have property in both Scotland and Northern Ireland.

Most of the advice he gave seemed reasonable. So you might want try get a copy of his book.

As for an accountant I have paid for an accountant the last few years. Yes there fees come in at around £450.00 last year I got a refund that it will take 20 plus years at that money before I pay him again. I expect another refund this year to be similar. Remember accountant will look at all your income and give advice accordingly.

The cost you can off set to name but a few Interest payments, letting fee's, Insurance, repairs and depending if your property if furnished or not 10% of rent income.

The last thing you want is for HRMC to investigate you 10 years down the line and find out you have made a mistake all that time and for them to hit you with a big fine.

Reply to the comment left by "Neil Robb" at "13/01/2014 - 18:24":

"The last thing you want is for HRMC to investigate you 10 years down the line and find out you have made a mistake all that time and for them to hit you with a big fine."

My thoughts exactly Neil !!

A friend of mine made a mistake in his tax affairs to the tune of £200 tax, ie probably forgot to include a £1000 invoice......
They said that they thought he had done this deliberately, so fined him 100%, making it £400..
but then told him they thought he could have been done this for the last five years, so that makes it £2000...
and if he wanted to appeal, he could, but they would surely go through the last five years to see what else they could find!!!
...They wanted paying immediately, so he had to take out a bank loan.

Until last year, I had an accountant do the two years previous to that, when I registered and downloaded copies of them, she had made mistakes in both years, ones that could have made the taxman think twice and investigate me. !!!
---NO MORE accountants!! - do it myself now.

@ Paul the original poster

Given all the various opinions and self-help advice that have been posted on this thread I thought I'd go back to basics and ask my accountant why he claims or does not claim for me what he does.

Paul remenmber my situation is very much like yours. After a lifetime of PAYE I reluctantly went s/e as a consultant from 1.12.11 with a trading year to end 31st March annually and a gross fee income turnover of probably around £25K. I therefore have the dubious pleasure later this week of paying a large amount to HMRC for my tax to end 31.3.12 plus the advance payment or whatever they call it, 50% of same on account for 13/14.

I hope what follows helps you as it explains an awful lot. To anyone doing their own tax returns instead of paying £450 a tyear excuse me but you need your collective heads examining. If at my hourly rate I couldn't make more than it costs me to pay my man his £450 I'd pack in work and avoid tax (almost) altogether!!

The 10 years comment interested me - I thought unless criminal etc activity or serious fraud was suspected that HMRC usually only went back 6 years?

Anyway here is the definitive tax answer Paul for someone in mine and your positions. Note middle paragraphs on 'registering' part of a home wholly for business purposes. As I suspected potential problems though it was my second guess that was correct and CGT not my first reference to C Tax.

Hi client

Mileage – no, we are not using the mileage x 45p per mile method. In your 2013 accounts, we used your total car expenses (fuel, service, repairs, road tax & insurance) of £3,495.16 and multiplied this by the business use of 3,000 miles over the total miles of 10,500 to give a motor expenses claim of £998.62. In addition, we claimed capital allowances of £938 on your car multiplied by the business use to give a claim of £272. The total claim was thus ££999 + £272 = £1,271. This is slightly less than 3,000 miles at 45 pence per mile but we started this way based on your car being introduced into the business so we have to continue on this basis until the car is swopped.

The allowance claimed for your office at home is on the basis of £4 per week. This is meant to compensate you for the extra cost of lighting, heating & cleaning the room when it is used as an office. You can claim on a business proportion basis.

However, this doesn’t work for the vast majority of clients as they can’t seem to keep records of all of the costs involved in running a house and they don’t want to pay for my time in assembling all of the relevant information & formulating a claim. Additionally, HMRC did actually issue a paper on the use of a residence for business purposes.

As you would expect, they made things much more complicated than it should be even suggesting that a log be kept of the use of the room to prove that it was used exclusively as an office. Thus, if you sat at the office computer and did home banking to pay domestic bills or sent personal e-mails or used the computer to play games on, this would not be business use so the room would not be used exclusively for business purposes.

There is always also the potential of capital gains tax problems if the house was sold and clients might want the benefit of a claim like this but they would hate to be told that they are not entitled to the Principal Private Residence exemption due to the business use of the house.

For all of these reasons, I do not like the apportionment basis for use in a standard domestic situation. It might work in certain situations where the house can be partitioned off & separated into business & domestic use but this is fairly rare. Frankly, it’s more trouble than it’s worth & I therefore avoid the apportionment basis in most cases.

This doesn’t mean that my method is wholly correct as HMRC issued guidance on this in their paper and their suggestion was that an allowance of £2 per week was adequate in many cases. I don’t agree that it is & have always claimed more & this has never been queried so I have continued to claim what I believe is reasonable – in your case £4 per week as mentioned above. If this was ever queried, we might have to concede that our claim was excessive but this is a bridge to be crossed if we ever get that far.

I hope that this deals with your ‘2 quick questions’ – as you can see, these things are never capable of a quick reply – things are far too complicated nowadays for that!

Reply to the comment left by "Industry Observer " at "14/01/2014 - 08:21":

Hi

As like most I am not an expert the point I was trying to make it its better for a professional to guide you and do your tax return.

If you do not pay the correct amount of tax. The HRMC can say that you have committed fraud and prosecute. If this happens they can use the criminal asset's laws to seize what they believe has been gained by criminal activity not paying tax falls into this category .

While they will not go after Starbucks and other big company's they are more and more chasing small landlords and property developers That are being prosecuted this way. I personally know of two. One lost all there property and by the time he has paid his legal bill he will be left with absolutely nothing.

I pay for piece of mind.

All, I have read the thread with interest. My view is:
1. Ignorance of the tax law is no excuse
2. If you don't know and understand the tax law employ someone who does.
3. If the HMRC are reading this (likely) expect a few tax investigations on landlords.
4. Anyone who thinks they can save time using 'made up allowances' will soon find they are spending a lot of time trying to justify the unjustifiable to an HMRC investigator. And as one poster noted HMRC when they do an investigation take a very extreme view - if you did it once by mistake you do it all the time. Reason does not exist in an investigation.

Personally, now I do my tax return myself, I don't claim any "made up" allowances.
I had always provided all the information in spreadsheet format anyway, so it was just a case of a few tweaks for the return.
I put down my income, my real costs and expenses, interest, etc.
I am happy if i pay a little more tax so as not to err on the side of "getting away with" some little deduction.
If I get a 'look' from the revenue, I can justify EVERYTHING, there's no borderline deductions for me.
Who would put down £2 per week room use, £104 per year, so that's £20.80 tax saving, jepodising your whole CGT position in the future, just for £20 !! ?

Most people think that the tax advisor is doing them a favour if they put in this or that against tax, but when the advisor puts in things like replacement double glazing, when there was only single, against rental income, for example, it's not the advisor who will get the investigation and the fine !!! (although the inspector may look at more of his clients and question the advisor's methods)
- The tax advisor gets lots of praise from you for reducing your tax bill, but little do you realise that if the inspector calls, it will be costing you even more money for the inspector to sit with your advisor for a day or two, going through every little detail, of course the advisor doesn't mind this one little bit, it is you who's paying his hourly rate !!

When you put iin the return it specifically says YOU are responible for the information on that form, not the advisor !!

No doubt there will be so called advisor's who, dare I say would like to have the tax man looking at the position as it is fees for them. I have known Accountants who had purposely trapped their customers and had the nerve to charge them extra £000 as part of tax planning fee.

I. fully agree with Jeremy Smith. If one tries to claim all and sundry even if one is entitle to it either by legislation or by practise. If the inspector then finds things which he/she is not happy about. No understanding will be offered and the whole book will be thrown at you.

I am a firm believer that no matter with all the honestly,sincerity. The complications of tax legislations and the constant changes in laws/working practises even the professional will get it wrong at some stage. In this instance one will have to pay the fines as the taxman will expect the professionals to be knowing what they are doing and the benefit that may get offered for an innocent mistake will not be extended to the client whose affairs are being looked after by a professional..

If you are a NLA member you get tax investigation insurance free as part of the membership. It's a no brainer really for £85 which is allowable against tax.