Shocked Chancellor orders landlord tax scrutiny

Any money spent on readying a buy to let property for letting that is not a capital cost can be included in the first year accounts.
Refurbishing a letting property generally adds up to more than the first year’s rents & creates a trading loss.
His loss can be carried forward to use against future profits.
E.g.A landlord spends £10,000 readying a home to let.
In the first year he has rent of just £3,000 & other expenses, like letting agent costs, insurance, gas certificates etc of £2,000.
The rental profit is £1,000.
Deduct the profit from the £10,000 loss & carry forward the £9,000 balance to set off against the next rental profit & so on until the whole amount is spent.

The above goes against everything I've been told. Is the above really true. I've been told by many accountants that until you get a tenant in you can claim nothing!

Improvements can be offset as they are not capital costs but it is a fine line and specifics should be checked with HMRC if in any doubt.

I agree with Paulshears I have always understood that you cannot claim for getting a property prepared for letting and can only claim certain ongoing costs AFTER rent has been paid. Many costs are not reclaimable until the property is sold.
I laso understand that the losses can be carried forward if the property is held in a limited company but not is it is owned by an individual?

I need to investigate futher unless someone can save me the time?

Hi Mary

I am not the author of this post buy I am 100% certain that a private individual can roll forward rental losses.

I will go back to the author of this piece, who incidentally is a renowned Dummies Guide Tax author, and ask him to provide more detail on the ambiguity on what is and what isn't a capital expense in the context of this article. Please feel free to run a parralel investigation and report back.

If necessary a correction will be made and noted.

Regards

Mark

these costs seem perfectly reasonable as they are costs incurred in running the business that you would not have unless you were in the buy to let business I don't understand what the fuss is about , these are expenses . Most good property accountants will understand this and advise. I believe it may be the first property you buy where you are currently not trading ie collecting rent that it is not possible to claim refurbishment costs 

I have been investing for 10 Years. My accountant has always let me use initial set up costs as offsetting expenses as long as they are not capital improvements. This lead to a trading loss for several years as I was also remortgaging and increasing mortgage costs. This is completely allowable and has enabled me quite legally to not pay any tax until those losses have been wiped out. This myth about you not being able to claim anything until you have a tenant is news to me. I find it incredulous that the Chancellor thinks that claiming legitimate expenses to get a property ready for let, and to offset mortgage interest ( but not any capital repayment) is tax avoidance. Look at Amazon and Google if you want to claw back some tax and leave us small fry alone.

George Osbourne is 'shocked' ! Give me a break. If that’s true,
 he must be completely stupid (which I doubt) to fail to appreciate that
buy to let is a business like any other. Income does not equate to profit and
the costs of running a business, including interest payable on loans to finance
the growth of that business, are clearly an expense incurred wholly and
specifically in relation to the business and are justifiably a deductible
expense. To try and change that situation would be ludicrous.

Controversial though it may be – but it's a fact – the rich actually
pay a lot more than their fair share of tax already. According to HMRC the
top 1% of earners pay a  27% of all income tax, whilst the bottom 50% of
earners, despite being the people who benefit most from the public services
income tax is supposed to pay for,  paid only 11% of the total income tax
amount collected. 

So the fact is the rich pay a disproportionately high amount of tax
and contribute massively towards an education system their children don't use ,
a health service they avoid wherever possible, and in general contribute a damn
site more to the welfare state and public services than all the people who
whinge that the rich don't pay enough tax.

It's time the government stood up for those
people in this country who actually create businesses and produce the wealth and for landlords who provide much
needed housing instead of pandering to ignorant Daily Mail readers.
 George – try to grow a pair. 

Does anyone actually read the HMRC guidance? Buying a property which demonstrably is not fit to rent and requires work means that the required work is part of the capital cost to purchase the property. Once the property is fit to rent it is available to potential tenants (assuming you are not starting your business) and all costs are now part of the 'operating cost' to run the property. The capital costs are used as the 'purchase cost and become part of the capital gains calculation. The operating costs are part of the income tax calculation. What is difficult to understand? All of it is taxed. You don't pay tax on your gross income from employment - you deduct your expenses first - work out the net income and pay tax. This is a non story.

Would be useful to have a more detailed article on this with examples.  What about the SDLT at purchase is this a cost to the business in the first year accounts?

Oh Dear, Oh Dear, Oh Deary me,

Poor George is 'shocked' that people choose to minimise their tax payments by using legitimate reliefs available in what has become a completely farcical tax system.  You couldn't make it up, the Chancellor of the Exchequer displaying stupendous naivetee, or am I biring cynical in thinking this is just one big
 red herring?  This lot all know perfectly well what goes on in the tax system, they are just playing us all for fools.  They are up to all the tricks in the book themselves, so don't be fooled by all this codswallop.  They are just looking for excuses to bring in more swingeing taxes to make up for their general mismanagement of the public purse.  Until they stop funding illegal immigrants to the tune of 300GBP per week, we will never sort out the finances in this country.