Self assessment - part claim of expenses paid in prior year

[AlexC1981]

Hi All,

Thanks for reading this, I hope someone won't mind answering a brief question!

I let out a flat which has an annual service and ground rent charge of £700 that is paid every December. It isn't set up as a business.

I'm completing the Self Assessment form for 2022-2023 tax deductible allowable expenses. I have claimed the Dec 2022 cost fully as an expense, but can I claim a portion of the Dec 2021 cost that covers the period 6th April 2022 to end of Nov 2022, even through it wasn't actually incurred in that period?

Thank you.

[Countdown]

Why would you be claiming more than 12 months worth of an annual expense in any 12-month period?

Some people do their accounts on a cash basis , some do it on an accruals basis. You can use either system but you do need to be consistent

[CharlesElliott]

There is actually a question in the return that asks how you are accounting for costs. The simple way to do it (cash basis) is just to claim the full amount in the year you paid it.

https://www.gov.uk/hmrc-internal-manuals/property-...

[AlexC1981]

Thanks, I've done everything cash based, so I will leave it out. It's my first self assessment, so I wanted to double check I wasn't being silly by leaving it out of the expenses total.

[Countdown]

Didn’t you claim the Dec 21 payment in your 2021-22 Tax Return?

[AlexC1981]

It's only been rented out from May 2022 so this is the first time I have had to do a self assessment. I was living in it up to around Feb 2022.

[Countdown]

AlexC1981 said:

It's only been rented out from May 2022 so this is the first time I have had to do a self assessment. I was living in it up to around Feb 2022.

In that case strictly speaking you shouldn't be claiming the whole of the Dec 22 payment. You should only be claiming 11/12ths of it (May 22 - March 23)

[AlexC1981]

Thanks for all the advice. It all seemed so simple until this point

I've just had a look at the letter the freeholder sent last year. The Dec 22 payment covers costs for the following year of Jan 23 to Dec 23.

So should I claim May 22 to Dec 22 of the Dec 21 payment?

And Jan 23 to April 23 of the Dec 22 payment?

If I do that, won't I have to switch to traditional accrual accounting, which means adjusting the rental income (and other income and costs) as well so it matches what the income would theoretically be on the 5th of April, rather than just going by income received by that date?

Or keep it simple and claim the Dec 22 payment in full (since it is paid in full), which means I lose tax relief on May 22 to Dec 22 from the Dec 21 payment. It would be worth about £180 in my pocket, which would be nice to have, but not if it's going to make my accounting more complicated going forward for years to come.

[MaxFromage]

Countdown said:

In that case strictly speaking you shouldn't be claiming the whole of the Dec 22 payment. You should only be claiming 11/12ths of it (May 22 - March 23)

The default basis is cash accounting, so he should be claiming the whole of the Dec 22 payment.

Unless he chooses the accruals basis, and then he should claim for the period he started renting to 5th April 2023.

[MaxFromage]

AlexC1981 said:

Thanks for all the advice. It all seemed so simple until this point

I've just had a look at the letter the freeholder sent last year. The Dec 22 payment covers costs for the following year of Jan 23 to Dec 23.

So should I claim May 22 to Dec 22 of the Dec 21 payment?

And Jan 23 to April 23 of the Dec 22 payment?

If I do that, won't I have to switch to traditional accrual accounting, which means adjusting the rental income (and other income and costs) as well so it matches what the income would theoretically be on the 5th of April, rather than just going by income received by that date?

Or keep it simple and claim the Dec 22 payment in full (since it is paid in full), which means I lose tax relief on May 22 to Dec 22 from the Dec 21 payment. It would be worth about £180 in my pocket, which would be nice to have, but not if it's going to make my accounting more complicated going forward for years to come.

Your default basis is cash accounting:

https://www.gov.uk/hmrc-internal-manuals/property-...

So you would claim all of the Dec 22 payment.

If you go accruals, then from an expenses perspective, you would be claiming part of the December 2021and 2022 payments for the period you rented the property in the tax year.

[AlexC1981]

Thanks. I'll stick with cash and leave out the 2021 payment.