Will HMRC let you claim for a property purchase that fell through?

Hi Heather,

It depends on if the cost are considered part of the process of deciding whether to purchase the property or not (this would be considered a revenue cost) eg. a valuation would be a tool to enable you to make an investment decision.

If it was a cost of purchase (then this would be a capital cost).

From reading up on it if you had already made the decision to purchase and the vendor pulled out then I believe the professional fees may be allowed to be claimed for.

I am not an accountant though and don't know all the circumstances or what costs you are considering so you should only take the advice of a qualified and insured accountant.

Heather, I am certain that abortive costs are Tax Deductible against your property rental income for the year in question particularly if it was your intention to proceed with purchase and other party withdrawn from sale.

Therefore it might be time to change your Accountant. Alternatively, you can proceed with their advice now and do not claim but later on, you can do your research and have something in writing from another expert or HMRC and then reclaim it from your Accountant equivalent amount.

No. You cannot claim.

I wouldn't waste money on a second professional opinion - it would just be throwing good money after bar.

Why?
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Mark, it's your "Why" question asking why our accountant says we can't claim or why we are trying to claim? We were forced into buying it with cash when our mortgage Co declined and we incurred costs borrowing the money. Then the vendor, who knew we were trying to complete before the sdlt hike said he'd only complete if we paid him an extra £8k thinking he had us over a barrel so we walked away. Plus we had legal fees etc.

Reply to the comment left by "Heather G." at "26/01/2017 - 23:04":

My "Why?" Question was directed to H B.

I have an opposing opinion to him.

I think your abortive costs can be offset against other rental profits. You only have a problem if you never have any rental profits to offset the abortive costs against.

The other problem you have is switching accountants. However, that more of a decision than a problem really.
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My understanding is that Heather has expanses that could be legitimately offset against business income, not personal income.

However, there was no income to offset it against - it was to be the first BTL property and I imagine fell through right at the end of the tax year (given the ransom ploy of the seller). As an expense rather than a capital loss I do not think that they could be carried forward.

I've had approximately 7 to 10 houses not go through in the last 20 years or so.
And my accountant at the time, said I couldn't claim for any costs at all. Very annoying.
However, I have also had some not so great accountants, so why not got a second opinion......

Reply to the comment left by "H B" at "27/01/2017 - 07:34":

My point is/was that if an alternative rental property was purchased and resulted in profits the abortive profits could be offset against those rental profits. I agree that if there is no rental profit to offset the abortive expenses against them there is nothing to claim because rental losses cannot be offset against other income. The same goes for homeowners who main about not getting tax relief on mortgage interest in that if they have no rental profits to set their mortgage interest payments against then there is no tax relief. It's the same for all businesses, you can only claim expenses against business income. A business can claim tax relief on a car but a private owner cannot.

In short, rental losses can only be offset against rental profits.

Rental income minus rental expenses = rental profit.

I just wish somebody would explain that to the Chancellor of the Exchequer.
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m a is correct--from my dealings with IR--but try anyway!