Don’t forget the looming tax return and payment deadline for the end of January! Here TWD Accountants www.twdaccounts.co.uk/landlordzone have provided some tompical questions about tax.

Here at TWD we are constantly being asked tax related questions relating to landlords and small businesses. Here is a select few, which you might find interesting.

Question & Answer Section

Q. I own a number of rental properties; a mixture of self-contained flats and houses. I’ve received an email from a property expert that says I can claim capital allowances as a percentage of the cost of these properties, which will produce a guaranteed tax refund for me. Is that true?

A. No, this is not true. Capital allowances cannot be claimed for equipment or fittings used within residential properties, which the Tax Office refer to as ‘dwelling-houses’. There is an exception for properties that qualify as furnished holiday lettings, when each letting must generally be for short periods of less than 30 days. If you make a capital allowance claim for your rental properties it may be passed by the Tax Office, under their ‘process now, check later’ system. But when the Tax Inspector checks your claim it will be refused, any tax refunded will have to be repaid with interest, and penalties will be charged. This can happen up to 20 years after you submitted the incorrect claim!

Q. My employer has given me a form P11D, which shows that I am taxed on the cost of my smart phone. I thought each employee could have one tax-free mobile phone, so why am I taxed on my only mobile phone?

A. Tax Officials think smart phones are computers rather than phones, so don’t want to apply the ‘one free mobile per employee’ rule, when the mobile phone is a smart phone. However, this can work in your favour if the private use of the smart phone provided by your employer is insignificant. Where any computer equipment is provided to you solely for work purposes, and there is no significant private use, there should be no tax charge. This tax-free treatment doesn’t apply where the contract for the mobile phone is in your own name and not the company’s name. In that case, where your employer pays for your smart phone the cost is taxed as if it was part of your salary. To remedy this, make sure your next smart phone contract is made between your employer and the telephone provider and you are not a party to that contract.

Q. I work as a nurse in a NHS hospital. My professional organisation tells me I can claim tax refunds for the last 6 years, for the cost of the particular shoes and socks I need to wear for work. Is there a limit on what I can claim?

A. There are set limits for such costs, known as flat rate expenses, which vary according to the taxpayer’s profession and work description. The full list of tax claimable flat rate expenses can be found here: http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm. Nurses can claim £100 per year as a flat rate expense against their taxable income for uniforms without any receipts but in addition can claim £12 per year for the cost of shoes and £6 per year for stockings or tights. The £100 figure was £70 per year from 2004/05 to 2007/08. However, you need to make your claim quickly, as the deadline for claims relating to 2005/06 is 31 January 2012. The deadline for 2006/07 is 31 March 2012, and for 2007/08 it’s 5 April 2012. However those deadlines only apply if you were taxed under PAYE, and did not submit a self-assessment tax return for those tax years. If you did submit a self-assessment tax return for the year the claim relates to, your claims period is already limited to 4 years from the end of that tax year. In that case the earliest year you can claim for is 2007/08, and the claim must be received by HMRC by 5 April 2012.

December Key Tax Dates
19th/22nd – PAYE/NIC and CIS deductions due for month to 5/12/2011

31st – Deadline for 2010/11 self assessment online returns to be filed if you are an employee and want tax underpaid to be collected by adjustment to your 2012/13 PAYE code (for underpayments of up to £3000 only). VAT reclaim deadline for submission of all claims for non EU traders wanting to reclaim VAT in the UK.

Performing exceptionally well as an asset class compared to traditional investments over the last year, student accommodation in the UK has outperformed every other commercial property class, supplying regular returns throughout the economic crisis according to the latest Knight Frank Student Property Report 2012.

The report highlights that student property returns averaged 11.5% in September 2011 and although slowing from 13.5% in the previous year, still continues to lead the returns race in the market among commercial asset classes thanks to a structural shortage of purpose-built student accommodation in the UK combined with increasing global interest in the UK’s high ranking educational institutions.

With this in mind, the just released Knight Frank report identifies further rental growth in the student accommodation sector this year with James Pullan, head of student property at Knight Frank explaining that while London returns almost doubled to 15.1% in September 2011, taking average total returns to 11.5%, student accommodation in the regions outside of London is also robust with investment in towns which have more than one university along with a high density of students such as Liverpool, being the most lucrative.

In addition Knight Frank highlight that the UK is well placed to take advantage of the growing influx of overseas students into the UK, predicted to double by 2025 thanks to having 5 universities which are ranked in the world’s top 20 universities as well as reduced study costs for international students, derived from the weakness of the pound.

Ray Withers, Chief Executive of leading property investment agency, Property Frontiers which has successfully marketed numerous student accommodation projects in the North West city of Liverpool, comments,

“Home to three leading universities – The University of Liverpool, Liverpool John Moores University and Liverpool Hope University which have seen significant increases in applications over the years along with highly regarded English language schools such as LILA in the heart of Liverpool city centre and cheaper prices than London, Liverpool is one such city that perfectly accommodates the needs of higher education students.

“Liverpool presents the optimum buy-to-let environment for investors who will be able to reap significant returns from strong demand. In fact the Knight Frank Student Property report 2012 identifies that average rents for apartments and en-suite rooms in the regions such as Liverpool rose by 4% with total returns of around 10.5% last year so the benefits speak for themselves.”

With demand continuing to outstrip supply as increasing numbers of students from both home and abroad seek to attend universities in Liverpool, increasing pressure is being placed on the housing supply with the emphasis now on building new high quality private student housing developments such as Gradwell Street, central Liverpool.

As a student accommodation development offering en-suite rooms from only £48,000 with only 8 en-suite units remaining, Gradwell Street, adjacent to Liverpool One Shopping Centre and only minutes from Liverpool Lime Street station offers investors a 10% NET yield – assured in year 1.

At just £2,500 to reserve with only £30,500 to pay in April 2012, Gradwell Street is superior to other projects, combine great value (under £50,000) with larger en-suite luxury facilities right in the heart of the city. www.propertyfrontiers.com

Almost 90% of landlords who currently accept tenants on housing benefits have had problems with late rent and rent arrears, with 11% saying that payments have stopped altogether. Out of all the landlords surveyed almost 60% stipulated no housing benefit tenants when advertising their properties. This data was collected from a survey of more than 1,000 landlords in the UK and was conducted by the house share service, Spareroom.com.

The survey goes on to outline that most buy to let landlords (almost 90%) that were surveyed were against the change to the benefits system that automatically pays the Local Housing Allowance to the tenant instead of directly to the landlord. Lee Daniels, Managing Director of Helpland Limited, the leading national tenant eviction and landlord advisory company said: “The results of the survey are not a surprise to us. Over the last 4 months we have seen an increase of over 30% in instructions on serving notices on housing benefit tenants falling into rent arrears. With housing benefit caps coming into force as we speak and over the next 12 months we expect the number to rapidly increase further.” “The local authority will only pay the housing benefit to the landlord directly if there are a minimum of 8 weeks rent arrears.

This could be fatal to some landlords who rely on the rental income to cover their mortgages”. The change came to pass in 2008 and just over half of landlords who have housing benefit tenants have experienced issues with rent payments since the change came in. The survey also asked landlords why they were not willing to rent their properties to housing benefit tenants. Almost a third said that tenants that were not on benefits were more reliable, whilst almost half (47%) said that they did not want to subject themselves to the hassle that comes with payment problems. According to the results, the problems included late payments, damage to properties and tenants simply not paying at all.

Three quarters of landlords questioned said that they would not consider taking on a tenant who is on housing benefits even if the tenant had a guarantor for the payments. Overall, 34% of the landlords questioned said they have housing benefit tenants in their properties whilst almost half (34%) had previously done so.

“We have written to many local authorities as well as parliament to change the system to allow the housing benefit to be paid directly to the landlord. This would be seen as a massive incentive for private landlords to rent their properties to tenants claiming housing benefit and would ease the pressure currently on local authorities who are facing a negative response from private landlords” “We encourage our clients who are considering renting out their properties to Housing Benefit tenants to ensure either a guarantor is in place or a larger deposit is paid by the tenant to minimise their risk”.

Helpland are a specialist tenant eviction service and have helped landlords throughout the country deal with all aspects of problem tenants, rent arrears and tenancy agreements. To find out more, visit their website at www.helpland.co.uk or phone 0845 450 0536.