Tax on property business – 7 year rule & business travel

Tax on property business – 7 year rule & business travel

10:16 AM, 17th May 2014, About 11 years ago 7

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I’ve recently been reading the HMRC toolkit about rental tax which I found very clear and informative, until however, I called the HMRC and they corrected my thinking! The confusion is over this statement: Tax on property business - 7 year rule & business travel

“Expenditure incurred prior to the commencement of a rental business is allowable if it is wholly and exclusively for the purposes of the rental business and is not a capital expenditure”

You can also claim up to 7 years of expenses prior to the start of the rental business.

I assumed this would mean property sourcing costs such as attending viewing’s and estate agents at 45p a mile, Mobile phone costs etc. I was informed it was only costs AFTER acquiring the property.

But surely that flies in the face of the statement “Prior to the commencement of a rental business” as once you’ve bought the property the business has commenced

Any thoughts would be appreciated!

Thanks

Simon


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Mark Alexander - Founder of Property118

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10:21 AM, 17th May 2014, About 11 years ago

This one has me stumped too.

Please re-tweet the following so that we can help Simon to find the answer to his question .....

Romain Garcin

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11:08 AM, 17th May 2014, About 11 years ago

The rental business commences when the first property is let, not when it is bought.

Jason Holden

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13:41 PM, 17th May 2014, About 11 years ago

Reply to the comment left by "Mark Alexander" at "17/05/2014 - 10:21":

As stated, for a rental of property it is when it is let, also another thing to remember, when talking about property there are costs that can be incurred and then if a deal is aborted these are not allowable buy HMRC, speculative costs regarding land purchase etc.

Here is HMRC guidance:
http://www.hmrc.gov.uk/manuals/pimmanual/pim2505.htm

Use a good accountant or tax adviser they could end up saving you money in the long run!

Jason

Yvette Newbury

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23:22 PM, 17th May 2014, About 11 years ago

I can second what is said above. The rental business commences on the date of the first tenancy agreement, not when the property is purchased.

Puzzler

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23:28 PM, 17th May 2014, About 11 years ago

Purchase expenditure is allowable, provided it can be shown that it directly relates to a rental business (7 years prior to letting would be hard to justify even though it's in the rules); "swanning around looking at property" expenditure is not. Apologies if that sounds harsh but since you would not be able to confirm it, it is not allowable.

Linda Price

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8:41 AM, 18th May 2014, About 11 years ago

Reply to the comment left by "Puzzler " at "17/05/2014 - 23:28":

If you had all the contact with agents logged and the viewings in your diary confirmed with notes and the property details, would this be allowable? A lot of time and expense goes into searching for the right property so it would be unfair if it wasn't allowed.

Michael Barnes

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23:17 PM, 18th May 2014, About 11 years ago

Buying a property is a capital expense, not a revenue expense.
Therefore it is not allowable against revenue.
The expenses you quote are to do with buying and hence are capital.

Look at it this way: If you put something new into a property, say a new shower room, then that is capital expenditure and all the associated costs are capital expenditure.
Acquiring a property is just puting a new property into your business.

I don't know if such expenditure is claimable against capital gains, but I would have thought so.

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