My First Tax Return - DIY

[AuntyJean]

Having spent a small fortune doing up my property after buying out my now ex-husband I rented out my house in Feburary this year. I am now faced with filling in a tax return for the first time and find that a lot of my costs are not tax deductable. The property is let unfurnished but I put in new sockets, a whole new kitchen, replaced the whole of the bathroom and replaced the back door as it was rotting, with a d/glazed one.

Could someone please let me know if I have got the following right - the last figures represent the Tax Box No.

14/02/2006 1st Months Rent £595.00 5.20
01/03/2006 Rent 2 £595.00 5.20
03/04/2006 Rent 3 £595.00 5.20
22/11/2005 Buildings Insurance -£262.50 5.24
28/11/2005 Water Rates -£57.03 5.24
03/02/2006 Elect Bill part -£24.12 5.24
13/02/2006 Balance Gas & Elect -£86.35 5.24
13/02/2006 Refund for overpayment Water Rates £24.03 5.24
28/11/2005 Part payment for redecs -£1,500.00 5.25
23/12/2005 Part payment Redecs -£1,250.00 5.25
30/12/2005 For Gas/Plumbing (part) -£150.00 5.25
02/01/2006 Part payment Redecs -£500.00 5.25
03/01/2006 Final payment Redecs -£1,500.00 5.25
07/01/2006 Carbon monoxide alarms -£38.49 5.25
10/02/2006 Replacement Aerial -£100.00 5.25
02/01/2006 First Interest payment -£530.61 5.26
01/02/2006 interest Payment 2 -£319.33 5.26
01/03/2006 Interest Payment 3 -£347.33 5.26
03/04/2006 Interest Payment 4 -£319.33 5.26
21/09/2005 Valuation Fee -£275.00 5.27
11/11/2005 Sols fees -£548.63 5.27
05/12/2005 Land Registry fee -£20.00 5.27
14/02/2006 Intro Fee -£349.56 5.27
14/11/2005 Rubbish Removal -£30.00 5.29
05/01/2006 Folders for logs -£5.00 5.29
09/01/2006 Extra Keys for front door -£20.00 5.29

And, could you let me know if I am able to claim for any of the following.

19/11/2005 Mira Sport Shower -£163.56
19/11/2005 Bathroom Tiles & cabinet -£113.53
20/11/2005 Vanity Unit for b'room -£62.10
21/11/2005 Bathroom Suite -£224.38
01/12/2005 Part payment for kitchen -£3,500.00
18/12/2005 Final payment Elects -£1,400.00
23/12/2005 Vinyl for bathroom -£40.00
27/12/2005 Laminate flooring -£414.86
28/12/2005 Bathroom shower rail -£8.99
29/12/2005 Toilet seat/lightshade etc -£44.29
29/12/2005 Lampshades/vase -£35.92
29/12/2005 Curtain poles/towel rail etc. -£52.95
01/01/2006 Padlock & rawl plugs -£5.98
02/01/2006 Dep for carpets -£1,000.00
07/01/2006 Balance for carpets -£250.00
07/01/2006 Final payment (Gas/Plumbing) -£80.00
13/01/2006 Wood primer -£4.00
14/01/2006 Fitting flooring -£150.00
17/01/2006 Replacement back door -£450.00
22/01/2006 Hacksaw & doorstrip -£6.08
23/01/2006 Doorstops & filler -£4.18
24/01/2006 Replacement lock for FD -£12.00
27/01/2006 Drill & Filler -£23.50
30/01/2006 Extra keys for new FD lock -£5.00
30/01/2006 Finishing off flooring etc. -£80.00

[Tax Accountant]

There are no clearcut answers to a number of larger items of expenditure.

To start with, you need to clarify the history of the property ownership and use prior to commencement of letting.

Am I correct in thinking that this property was already owned by you and your husband? If so, how was this used prior to letting?

Why was it necessary to spend so much money prior to letting?

You should also read some of the recent postings in this forum regarding the expenditure incurred prior to commencement of letting.

The crucial test would be whether the property was fit for letting without incurring the expenditure. If it wasn't, and the expenditure was necessary, most of the renovation expenses would be added to the cost of the property and not allowable as repairs.

Ramnik

[AuntyJean]

To start with, you need to clarify the history of the property ownership and use prior to commencement of letting.

Am I correct in thinking that this property was already owned by you and your husband? If so, how was this used prior to letting?

Yes, it was owned by us and my husband was living there.


Why was it necessary to spend so much money prior to letting?

The bathroom was disgusting. There was mildew everywhere, the paper was peeling off and the shower was ancient.

I also had to have all the electrics checked and a new MCB put in. The back door was a wooden glazed door and was rotten at the base.

The carpets - well! They were the original cheap foam backed carpets from 20 years ago. The one in the lounge had been torn in places.

I admit the kitchen was 'working' but the units were stained and some were broken. I looked at replacing just the doors but they did not make doors to fit the cases so it had to be a new kitchen. My husband took almost all the appliances.

If I can claim for any of this could you please guide me as to what section this would fall under. I am considering ringing the tax office for advice. Has anyone experience of this? Are they helpful?

[Tax Accountant]

To start with your final comments, I can't see the tax office giving you specific answers to each item of expenditure.

My view is that the property wasn't in a fit state to let before the renovation work.

On this basis, without splitting hairs, I would suggest broadly as follows:

Land and Property supplementary page L1 obtained by calling the orderline:

Income:
14/02/2006 1st Months Rent £595.00 5.20
01/03/2006 Rent 2 £595.00 5.20

03/04/2006 Rent 3 £595.00 5.20
I suggest that this is included in next tax year if it is received in advance for the month of April 2006.

Expenditure:
22/11/2005 Buildings Insurance -£262.50 5.24
28/11/2005 Water Rates -£57.03 5.24
03/02/2006 Elect Bill part -£24.12 5.24
13/02/2006 Balance Gas & Elect -£86.35 5.24
13/02/2006 Refund for overpayment Water Rates £24.03 5.24


07/01/2006 Carbon monoxide alarms -£38.49 5.25
10/02/2006 Replacement Aerial -£100.00 5.25
3/11/2005 Rubbish Removal -£30.00 5.25
05/01/2006 Folders for logs -£5.00 5.25
09/01/2006 Extra Keys for front door -£20.00 5.25


14/02/2006 Intro Fee -£349.56 5.26
02/01/2006 First Interest payment -£530.61 5.26
01/02/2006 interest Payment 2 -£319.33 5.26
01/03/2006 Interest Payment 3 -£347.33 5.26

03/04/2006 Interest Payment 4 -£319.33 5.26
I suggest that this is included in next tax year if it is charged in advance for the month of April 2006.

There may also be other allowable expenses, eg, gas safety certificate, furnishings wear and tear allowance if let furnished etc.


These are not allowable as an expense.
They are part of the cost of acquiring the property.
21/09/2005 Valuation Fee -£275.00
11/11/2005 Sols fees -£548.63
05/12/2005 Land Registry fee -£20.00


These are not allowable as an expense.
Instead, they should be added to the cost of the property as improvement expenditure.

28/11/2005 Part payment for redecs -£1,500.00
23/12/2005 Part payment Redecs -£1,250.00
02/01/2006 Part payment Redecs -£500.00
03/01/2006 Final payment Redecs -£1,500.00
19/11/2005 Mira Sport Shower -£163.56
19/11/2005 Bathroom Tiles & cabinet -£113.53
20/11/2005 Vanity Unit for b'room -£62.10
21/11/2005 Bathroom Suite -£224.38
01/12/2005 Part payment for kitchen -£3,500.00
18/12/2005 Final payment Elects -£1,400.00
27/12/2005 Laminate flooring -£414.86
28/12/2005 Bathroom shower rail -£8.99
29/12/2005 Toilet seat/lightshade etc -£44.29
29/12/2005 Curtain poles/towel rail etc. -£52.95
01/01/2006 Padlock & rawl plugs -£5.98
30/12/2005 For Gas/Plumbing (part) -£150.00
07/01/2006 Final payment (Gas/Plumbing) -£80.00
13/01/2006 Wood primer -£4.00
14/01/2006 Fitting flooring -£150.00
17/01/2006 Replacement back door -£450.00
22/01/2006 Hacksaw & doorstrip -£6.08
23/01/2006 Doorstops & filler -£4.18
24/01/2006 Replacement lock for FD -£12.00
27/01/2006 Drill & Filler -£23.50
30/01/2006 Extra keys for new FD lock -£5.00
30/01/2006 Finishing off flooring etc. -£80.00

These are furnishings and therefore not allowable as an expense. You can claim for these when renewed or by way of wear and tear allowance.
23/12/2005 Vinyl for bathroom -£40.00
29/12/2005 Lampshades/vase -£35.92
02/01/2006 Dep for carpets -£1,000.00
07/01/2006 Balance for carpets -£250.00

I hope this helps.

Ramnik