Solicitors' fees on property transfer- deductible?

[JDO]

My wife and myself own three btl properties.

We have recently changed from owning the properties as joint tenants to tenants in common.

My solicitor has taken care of the paperwork etc and has charged me £270.

Can I claim my solicitors fees as a business expense...?

Regards

John

[susan 2]

Dear JDO - I would think you could include this in your expenses.Although someone on this forum may correct me. Personally I use this criterion for tax- would I have had this expense if I did not own the properties. If I would have had it regardless of owing then its not included. Otherwise it goes on the expenses. I find this an easy method - it also allows you to charge for all sorts of odds and ends, like books about property letting, magazines for ideas for furnishing the let etc. I had a conversation with a gentleman in the tax office some time ago, and he said that was perfectly O.K. So put it down, they can always correct you. Susan

[JDO]

Susan, thank you for your reply.

I like your logic...!

Regards

John

[susan 2]

Dear John - thanks for the thanks! So many people never bother to thank you on these forums. I got the tip from a book I had some years ago about tax. (Cant't remember the name of it) But he started off by reminding his readers to keep the receipt for the purchase of the book, as it could be included in expenses. It really made me think, and I've used his ideas ever since! Best wishes Susan :)

[Tax Accountant]

Dear JDO - I would think you could include this in your expenses.Although someone on this forum may correct me. Personally I use this criterion for tax- would I have had this expense if I did not own the properties. If I would have had it regardless of owing then its not included. Otherwise it goes on the expenses. I find this an easy method - it also allows you to charge for all sorts of odds and ends, like books about property letting, magazines for ideas for furnishing the let etc. I had a conversation with a gentleman in the tax office some time ago, and he said that was perfectly O.K. So put it down, they can always correct you. Susan


Dear Susan,

I am not too sure if I agree with your answer or the logic used.

To illustrate this, take the example of you selling a BTL. You only had this expense because you owned the BTL property.

You have an extension in your BTL property and as a result you incur planning fees etc. Again you incurred the expense because you owned the BTL property.

However, in both cases the expense is not deductible against rental income. It is a capital expense and only deductible in the calculation of your CGT liability.

In the case of the querist, JDO's expense has not been incurred as a direct result of letting the properties. It has been incurred to change the ownership status and I consider this is a capital expense, thus only deductible in the calculation of CGT if and when it is sold.

Just because some expenses have not been queried by the tax office does not mean that they agree with you. Sometimes they are not really aware of the exact nature of the expense because of the limited details supplied by you on your return. In other cases, they may take the view that it is not worth the hassle to challange you for the small amounts involved.

Sorry if you find my reply disappointing. I am only stating my view of the tax law.

Ramnik

[susan 2]

Dear Ramnik - Don't be sorry - one of the joys of these forums, is that if you make a mistake, someone will always correct you. And of course I should have made it clear that you must sort out which expenses are income tax and which capital gains tax etc. I have done a lot of research on tax since we sacked our accountant. (He tried to charge us more than we had made in profits one year!) What I found was that there are many small expenses which you can claim, that many people including myself at the beginning forget about. These small items can mount up. They may only rejuice your bill by a few pounds, but heh where tax is concerned even a little is great! You are probably right about John's solicitor's bill being capital gains, but I think he should check with the income tax office. I have always found them very helpful. Insidentaly when I spoke to them in detail regarding the items I mentioned in my answer i.e magazines, books etc they confirmed they were legitimate expenses. Also cutting keys and other small repair items. But of course KEEP THE RECEIPTS! Best wishes Susan

[Tax Accountant]

Dear Ramnik - Don't be sorry - one of the joys of these forums, is that if you make a mistake, someone will always correct you. And of course I should have made it clear that you must sort out which expenses are income tax and which capital gains tax etc. I have done a lot of research on tax since we sacked our accountant. (He tried to charge us more than we had made in profits one year!) What I found was that there are many small expenses which you can claim, that many people including myself at the beginning forget about. These small items can mount up. They may only rejuice your bill by a few pounds, but heh where tax is concerned even a little is great! You are probably right about John's solicitor's bill being capital gains, but I think he should check with the income tax office. I have always found them very helpful. Insidentaly when I spoke to them in detail regarding the items I mentioned in my answer i.e magazines, books etc they confirmed they were legitimate expenses. Also cutting keys and other small repair items. But of course KEEP THE RECEIPTS! Best wishes Susan

Hi Susan,

I agree that if in doubt always check. I also agree that the tax office is actually much more helpful than people would give them credit. However, the actual people at the tax office who you may get through are normally not technically trained and may give answers which are not necessarily correct. Such unrecorded replies are not binding on them as you don't have any proof of what advice they have given you. It is also possible that people quite often read into an advice what they want to hear.

The expenses you mention are small expenses to do with the running of your business and they don't actually reflect in an increased value for your business, neither are they to do with acquiring, disposing or establishing the ownership issues and the like. Therefore, the sort of small expenses you mention would normally be OK to claim.

The cost of renewing items which are not furnishings are also claimable. As far as the furnishings is concerned, you could claim these on a renewal basis or a blanket claim of 10% x gross rents for wear and tear.

Ramnik