Spreading maintenance costs when letting a flat
Discussion
Hi,
I rent out a flat in a block with 8 other flats and the council is the leaseholder. The block is due to get a new roof installed (felt type) and its been due for some time. The cost of this will be quite expensive lets say around £9k per flat (total cost divided by the number of of flats) all of the work being arranged by the leaseholder and I will get an invoice once done. I understand I can deduct this against rental income as it's general maintenance and repairs.
What I would like to do is spread the deduction over 3 years, so put £3k a year for general maintenance for 3 years in my tax returns. As its a sizeable sum and for the 3 years it would be roughly equal my rental profit and therefore reduce the amount of tax I have to pay for the 3 years, rather than the one year.
I was wondering if anyone has any advice on how I could do this and its even possible and above board?
One option is to ask the leaseholder to invoice me for the work over 3 years which I don't think they are willing to do, other option is to get a loan but I would end up paying interest which i'm not to keen on. Any ideas, can i just spread the cost over 3 years?
Thanks for you help,
Johnny.
I rent out a flat in a block with 8 other flats and the council is the leaseholder. The block is due to get a new roof installed (felt type) and its been due for some time. The cost of this will be quite expensive lets say around £9k per flat (total cost divided by the number of of flats) all of the work being arranged by the leaseholder and I will get an invoice once done. I understand I can deduct this against rental income as it's general maintenance and repairs.
What I would like to do is spread the deduction over 3 years, so put £3k a year for general maintenance for 3 years in my tax returns. As its a sizeable sum and for the 3 years it would be roughly equal my rental profit and therefore reduce the amount of tax I have to pay for the 3 years, rather than the one year.
I was wondering if anyone has any advice on how I could do this and its even possible and above board?
One option is to ask the leaseholder to invoice me for the work over 3 years which I don't think they are willing to do, other option is to get a loan but I would end up paying interest which i'm not to keen on. Any ideas, can i just spread the cost over 3 years?
Thanks for you help,
Johnny.
From HMRC: "Rental business losses can’t be carried forward against any of the taxpayer’s other income. No special claim is required and, if appropriate, the taxpayer must deduct any losses brought forward from the previous year when calculating their rental business profit for the current year."
So in your case, let's say usual profit is £3k, but this becomes a £6k loss this year due to the additional £9k charge:
Year 1: £6k loss
Year 2: £3k profit (minus £3k brought forward, another £3k loss carried forward)
Year 3: £3k profit (minus £3k loss carried forward from year 2)
Year 3: back to normal
So in your case, let's say usual profit is £3k, but this becomes a £6k loss this year due to the additional £9k charge:
Year 1: £6k loss
Year 2: £3k profit (minus £3k brought forward, another £3k loss carried forward)
Year 3: £3k profit (minus £3k loss carried forward from year 2)
Year 3: back to normal
The basic rule with losses on rental properties is that -
a) in the year the loss is incurred, there will be no rental profit (naturally) and therefore no tax arising from any rental income
b) the loss is carried forward to the following year and offset against the following year's profit. If there are unused losses left over, they keep getting carried forward until they are extinguished.
In other words, there is no need for any chicanery or subterfuge when it comes to being billed by your suppliers.
a) in the year the loss is incurred, there will be no rental profit (naturally) and therefore no tax arising from any rental income
b) the loss is carried forward to the following year and offset against the following year's profit. If there are unused losses left over, they keep getting carried forward until they are extinguished.
In other words, there is no need for any chicanery or subterfuge when it comes to being billed by your suppliers.
- so glad I bought our freehold with the other owners!!! Seriously this sum sounds absurd.10% Wear and Tear Allowance was/is related to replacement costs of furniture and fittings.
It was not instead of actual repairs to the property. If you have genuine property repairs you could always claim those as well as the 10% Wear And Tear. What you couldn't do was claim the 10% Wear and Tear allowance AND claim for replacement beds, curtains, carpets etc.
And it only related to "Furnished Lettings".
From 6 April the 10% Wear and Tear allowance is gone - but actual claims for new beds etc are allowed.
What the 10% Wear and Tear Allowance was meant to cover per HMRC -
The 10% wear and tear allowance covers things like:
movable furniture or furnishings, such as beds or suites,
televisions,
fridges and freezers,
carpets and floor-coverings,
curtains,
linen,
crockery or cutlery,
beds and other furniture
This list is not intended to be complete but gives an idea of the assets the wear and tear allowance covers.
It was not instead of actual repairs to the property. If you have genuine property repairs you could always claim those as well as the 10% Wear And Tear. What you couldn't do was claim the 10% Wear and Tear allowance AND claim for replacement beds, curtains, carpets etc.
And it only related to "Furnished Lettings".
From 6 April the 10% Wear and Tear allowance is gone - but actual claims for new beds etc are allowed.
What the 10% Wear and Tear Allowance was meant to cover per HMRC -
The 10% wear and tear allowance covers things like:
movable furniture or furnishings, such as beds or suites,
televisions,
fridges and freezers,
carpets and floor-coverings,
curtains,
linen,
crockery or cutlery,
beds and other furniture
This list is not intended to be complete but gives an idea of the assets the wear and tear allowance covers.
Thanks all for the advice, I'll have a read of the details on HMRC's website.
The council got three quotes all of them coming in around the £70k mark. The roof is a fair size - all the flats have two double bedrooms and there is 3 flats per floor. Its not cheap and should of been done about 5 years ago. They done the block next store about that time but ran out of money to do my block, typical. There is never a good time but it being on the top floor I'll be happier when its done.
Cheers,
The council got three quotes all of them coming in around the £70k mark. The roof is a fair size - all the flats have two double bedrooms and there is 3 flats per floor. Its not cheap and should of been done about 5 years ago. They done the block next store about that time but ran out of money to do my block, typical. There is never a good time but it being on the top floor I'll be happier when its done.
Cheers,
Eric Mc said:
10% Wear and Tear Allowance was/is related to replacement costs of furniture and fittings.
It was not instead of actual repairs to the property. If you have genuine property repairs you could always claim those as well as the 10% Wear And Tear. What you couldn't do was claim the 10% Wear and Tear allowance AND claim for replacement beds, curtains, carpets etc.
And it only related to "Furnished Lettings".
From 6 April the 10% Wear and Tear allowance is gone - but actual claims for new beds etc are allowed.
What the 10% Wear and Tear Allowance was meant to cover per HMRC -
The 10% wear and tear allowance covers things like:
movable furniture or furnishings, such as beds or suites,
televisions,
fridges and freezers,
carpets and floor-coverings,
curtains,
linen,
crockery or cutlery,
beds and other furniture
This list is not intended to be complete but gives an idea of the assets the wear and tear allowance covers.
Sorry Eric you are og course 100% right - I'm muddling up over some carpet replacement I wanted deferred till after April.It was not instead of actual repairs to the property. If you have genuine property repairs you could always claim those as well as the 10% Wear And Tear. What you couldn't do was claim the 10% Wear and Tear allowance AND claim for replacement beds, curtains, carpets etc.
And it only related to "Furnished Lettings".
From 6 April the 10% Wear and Tear allowance is gone - but actual claims for new beds etc are allowed.
What the 10% Wear and Tear Allowance was meant to cover per HMRC -
The 10% wear and tear allowance covers things like:
movable furniture or furnishings, such as beds or suites,
televisions,
fridges and freezers,
carpets and floor-coverings,
curtains,
linen,
crockery or cutlery,
beds and other furniture
This list is not intended to be complete but gives an idea of the assets the wear and tear allowance covers.
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