carrying forward losses to next tax years

[saleem]

a) For how many years can losses be continously carried forward? Is it true only for 7 years?

b) Can mortage fees, solicators fees be offset when selling a rented property (for example few years after brought) or does the fees have to be listed in the self assessment tax year it was brought in?

[King_Maker]

a) No limit, assuming you continue to have a property rental business. There could be a problem if you stop and then resume. HMRC have indicated a gap of 3 years is likely to be OK.

b) Legal fees etc in respect of the sale should be deductible from the gain for CGT purposes.

[saleem]

Thankyou for your responses.

Regarding my question b,

Just to elaborate can the socilators fees, mortage fees etc paid when purchasing a property be offset against when selling the property in a different tax year? or does these fees need to be declared in the self-assessment tax period the property was brought in? When speaking to one tax person through the gov. they said this was optional

[Telometer]

1. Mortgage fees are deductible against rental income as and when they are incurred. These are the costs of arranging loan finance. They are NOT deductible against the capital gain when you sell.


2. Other fees are deductible against the capital gain when you sell, and it does not matter what year you incur them. e.g.

2000/01: spend 100 on house, 2 on solicitor, 1 on valuer, 4 on SDLT, 3 on mortgage fees
2001/02: spend 10 on extension
2002/03: spend 30 on extending lease, 6 on solicitor
2007/08: sell for 200.

You can deduct all the above costs save for the mortgage fees in your CGT computation. So (200-100-2-1-4-10-30-6=47). The mortgage fees were offset against rental income in 2000/01.

All those various costs, you need to keep the records until you sell the property - at which point you claim them in the self-assessment for CGT - i.e. in the 2007/08 return.

[saleem]

Thanks for your response.

Can't the cost of getting the loan (say 2.5% of mortage added to the loan), broker fees, mortage arrangement fees all be taken as part of the acquistion of property therefore included in the CGT computation?

As this helps to buy the property.

[King_Maker]

Thanks for your response.

Can't the cost of getting the loan (say 2.5% of mortage added to the loan), broker fees, mortage arrangement fees all be taken as part of the acquistion of property therefore included in the CGT computation?

As this helps to buy the property.

No, they are Income Tax items - which is the more favourable treatment, unless one is making a rental Loss.

[saleem]

I brought a property that I have been renting out from day one for 4 years now.

When purchasing it four year ago I paid loan fees (2.5 % added to loan), arrangement fees, broker fees and then when re-mortageing 2 years ago it I paid the same.
I never listed any of this in the self-assessment forms for those years so could they be included in this year's April 2008 as now I know they cant be part of the Captial Gains Computation? What are my options?

The reason they were not been listed as an expense previously was because when speaking to a gov. tax person they said it could be include in the Capital Gains computation when selling the property.

[King_Maker]

Unfortunately, the standard of HMRC personnel is variable (at best).

It might be possible to re-open the earlier years' SA Returns. Or, if it makes no difference, tax-wise, you could include these items in the 2007-08 Return, with an explanation in the "white space" area.

[Telometer]

Ah, that's why it's worth paying an accountant. He'll save you money in the long term.

[Mrs Jones]

That's what I do, and he has:)