When do I need to file a return and pay tax?

[dommorton]

Hi,

I've just let a 3 bed property which I jointly own with my brother.

We have collected 6 months rent in advance, which we split 50/50. Do I need to inform the revenue that I'm earning rental income right away? or do I wait until a certain time of year to file a return?

Also with us spending 20k on renovation over the last year is this recoverable in our tax? (new kitchen, bathroom, heating system etc)

Any help appreciated

[Tax Accountant]

Hi,

I've just let a 3 bed property which I jointly own with my brother.

We have collected 6 months rent in advance, which we split 50/50. Do I need to inform the revenue that I'm earning rental income right away? or do I wait until a certain time of year to file a return?

Also with us spending 20k on renovation over the last year is this recoverable in our tax? (new kitchen, bathroom, heating system etc)

Any help appreciated

You can notify the new source of income at anytime after it has commenced, but not later than 6th October following the end of the tax year during which the income first arose.

As for the 20K renovation expenditure, this is most likely to be capital and added to the cost of buying the property and taken into account in computing your CGT liability when you sell the property. However, you should first read other previous relevant threads in this forum to get some understanding of distingushing between revenue and capital expenditure.

Ramnik

[dommorton]

Fantastic just what I needed to know thank you :)

[Tax Accountant]

Fantastic just what I needed to know thank you :)

You are welcome.

But you must make sure to check whether any of the expense is allowable as repairs against rental income. In particular, you are referred to the following link:

http://www.hmrc.gov.uk/manuals/pimmanual/PIM2020.htm

Ramnik

[dommorton]

Blimey there's a lot to it isn't there

I think I best enlist the help of a tax adviser :eek:

[Tax Accountant]

Blimey there's a lot to it isn't there

I think I best enlist the help of a tax adviser :eek:

It all depends on the state of the property when you bought it and whether or not it was in a fit state of repair to let without first carrying out the renovation works.

The main paragraph to consider is as follows:

Repairs etc after a property is acquired

Achange of ownership combined with one or more additional factors may mean the expenditure is capital. Examples of such factors are:

A property acquired that wasn’t in a fit state for use in the business until the repairs had been carried out or that couldn’t continue to be let without repairs being made shortly after acquisition.

The price paid for the property was substantially reduced because of its dilapidated state. A deduction isn’t denied where the purchase price merely reflects the reduced value of the asset due to normal wear and tear (for example, between normal exterior painting cycles). This is so even if the taxpayer makes the repairs just after they acquire the asset.

The underlying principle is that the cost of buying a property in good condition is clearly capital expenditure. Hence the cost of buying a dilapidated property and putting it in good order is also capital expenditure.

Hope this helps.

Ramnik

[dommorton]

I really does help. It's making far more sense now and mainly because of your last sentance.

Thanks

[Tax Accountant]

I really does help. It's making far more sense now and mainly because of your last sentance.

Thanks

You are welcome. But do seek professional advice.

Ramnik