Membership fees - allowable expense?

[dabir0070]

Hi,
I have a small portfolio of buy to lets. Am I allowed to claim expenses against my rental profit for any membership fees I have paid to sourcing companies who send me details of distressed properties? Even though I have not bought a property through them, but I have paid a fee so I can view the distressed properties they.

[Always Problems]

I would have thought that any expenses incurred in the day to day running of your business will be deductible. Forinstance if you were a motor trader and you bought cars which were advertised for sale in the Autotrader you would be able to claim the cost of the publication, so any expenses which you make for researching where you might buy your next property is deductible.

[dabir0070]

This is what my accountant says, is he right:-

"Our view is that at the point where the property sourcing fee is paid, you do not own or have an interest in any of the land or property that may be included in the source list and therefore the expenditure can not be a transaction that produces rent or other receipts from a property that you owns or have an interest in."

When I paid the membership fees to these property clubs, it was with the intention that I am spending from the profit of my rental income, in order to increase my buy to let portfolio. Why is my accountant not allowing this?

[Telometer]

Always Problems, you do write some nonsense. Please don't just guess at tax, and do not post unless you know the answer.


OP, your accountant is correct.

If you were a motor trader, then the costs of similar memberships would be incurred in acquiring (or not acquiring) stock. If you were a property trader, then the costs of these "memberships" would be a deductible trading expense. However, you are not a trader, you are an investor. These costs have nothing to do with any investment that you HAVE MADE, therefore are not deductible against any CGT calculation on sale - as you'll never sell anything that was brought into being through this expenditure.

These costs have nothing whatsoever to do with the ongoing business of collecting rents from your investments, therefore are not deductible against your property income.

If you were to acquire a property through one of these memberships, then the (some?)cost would be a part of the base cost of the relevant property for CGT purposes - just as your solicitors' fees are.

[Phlash]

As is so often the case - agree with Telometer.

The 'business' is the day to day letting of the current housing stock. Window shopping for more properties, if it produced new BTL housing stock, would arguably be a capital expense and so deductible against any capital gains associated with the new stock.

At present therefore - it is a non-event for tax purposes.

[dabir0070]

What if I subscribed to property magazines, to keep me up to date with the current market conditions, the current laws and legislation etc. If those subscriptions can be taken as allowable expenses for my buy to let business, then can I argue that my fees (which are quite substantial) to Property Clubs should also be allowed?

[Telometer]

I'm afraid you're missing the point.

Reading about new landlord requirements - fire safety, gas certification etc. would give rise to an allowable expense for the lettings business.

The lettings business is completely separate from your acquisition of capital assets - the houses.

You do not have a trade of acquiring houses.