Refurb costs

[cma]

I recently inherited my fathers house which was in a bad state of decoration and repair. I've spent over 16k on a full refurb for things like:
New bathroom
New Kitchen Doors/tiles/floor
New Carpets throughout
Plasterwork reskimmed
Full redecoration
Replacement fires and cooker
Replacement Heating Boiler and radiators
Full rewire
Etc.

Can I off set all of this against tax?
Some of the work was cash in hand so no reciepts, I guess I cant claim this.
Do I need to fill in a full self assesment or can I just declare I have no income from it this year due to renovation costs?

Sorry if these are daft questions but I'm new to all this and its a tad confusing so any help is welcome.

Thanks in advance
Rob

[mind the gap]

As you're new to this, I would strongly advise you to pay for a consultation with an accountant, as this will almost certainly save you a lot more money than it will cost you in his fee (between £100 and £150 to explain/advise, or up to £300 to complete your first year's tax return for you. Costs will obviously vary depending on where you live. Shop around). It can be a bit complicated at frst - you will need to fill a tax return, even if you have made no profit/a loss, but he will know exactly what you should claim for (including perhaps the work you don't have receipts for), and whether there are things you can't claim for at this stage, but can later (e.g. against CGT). You can carry over any 'loss' (i.e. void periods, refurb costs) for the next few years until it has been soaked up by those years' allowances. Once you've sorted out the 2010-11 tax year, it will be simpler and you may well be able to do the return by yourself. But a good accountant at this stage is worth his weight in gold - well, in bags of finishing plaster, anyway. No, that's unfair - make it power tools!

Good luck - hope the letting goes well.

[cma]

Thanks for the advice, off to find a local accountant now.

[mind the gap]

Thanks for the advice, off to find a local accountant now.

They will all be shut at 8.44 pm on a Sunday night! Try in the morning. :)

[Telometer]

I doubt you can offset any of this against income tax. However keep all the records and you can offset it against CGT when you eventually sell the place.

[TaxationPete]

Have a read of BIM46906 on the HMRC web site. As Telometer has pointed out these expenses prior to the property entering your business are capital in nature and can be added to the value of the property when you dispose of it. Did you have a full valuation done when you inherited the proprerty as this plus your costs will form the base price for any CGT calculation. Regards Peter

[Always Problems]

As TaxationPete says above you need to consider CGT. Presumably the house will have been valued for Probate purposes (perhaps low) in the meantime you have spent an unproven £15,000 on it. Perhaps you may have paid for some of the items by card which will show up on your bank statements. Regarding your "cash in hand" payments. You dont have to prove that you have parted with money for lets say £500 to the plasterer. You just list what you have paid out in cash item by item and give it to your Accountant. The proof is in the plastered wall. I would at this moment get 2 estate agents round to value the property. This gives you a price "Fix" so if your Probate Valuation was artificially low you can look at what its valued at now and work out if you would have any CGT liability if you sold it now. This valuation of today will also assist in the future if you sell the house in arguing with the revenue. Bearing in mind you dont pay CGT on the first few thousand pounds. And if you are going to rent out I follow the principal of declaring "absolutely everything" as if you fiddle and are caught out a full tax investigation can ruin your life, as what happened to a friend of mine 30 years ago who did not declare some rent and the Revenue looks at the first 6 years and if they find anything they can go back 20 years and it ruined my friends health never mind his finances.

[Solent Watcher]

We did some work for an overseas client (UK tax payer). The key point seemed to be that once the AST was signed then any works invoiced for after the AST was signed was allowed PROVIDING it was a repair (like for like_) and not an improvement (add conservatory when there was not one before) Strongly support "always problems" comment re revenue; my other half who worked for a major national accountancy firm says you must never given revenue the chance becuase once they have their teeth into you not only is there the emotional toll but also the financial toll

[Telometer]

The key point seemed to be that once the AST was signed then any works invoiced for after the AST was signed was allowed PROVIDING it was a repair

Not so. The key test is whether the property was lettable in its current state, and this is interpreted so that as it wasn't let, it wasn't lettable.

[cma]

Thanks all for the replies.

Solent: Whats the AST?

Telometer: The property wasn't in a lettable state when I inherited it so this work needed to be done to let it.

I would get it valued but they all seem to charge £150 for each valuation now, with it refunded only if you sell it though them. So is it worth £300 +vat to get a base valuation now I've had the work done?

As for CGT I intend to keep the property and use it as a retirement pot, so wouldnt be selling for a good 20+ years hopefully. Plus I know nothing about CGT apart from I'll get stung for it when I do sell.

Thanks all.

[Telometer]

There is no need to value it now. You know your base cost for CGT purposes - it is probate value plus all the costs you detailed above. Keep detailed records, even if you have no receipt, including supplier, and then when you come to sell (if ever) they can be offset against proceeds to calculate CGT.

However, if you ever want to mortgage the property, then you DO need the value of the property at today's date, as the maximum mortgage that will be tax deductible is that on the value of the property when it is first let out.

AST = Assured Shorthold Tenancy [agreement].

You have, as a landlord, a whole range of statutory obligations regarding gas safety etc. etc. If this is your first property I recommend - at least for the first year - a good letting agent who will be worth his weight in gold in dealing with tenants and the law.

[jeffrey]

What's the AST?
Assured
Shorthold
Tenancy.

[cma]

Thanks again for the replies.

I have an agent dealing with it all as a fully managed package. Infact it went on the market on Friday evening and was snapped up by monday morning, didn't even get chance to put a board up, perhaps I should have asked for a higher rent :)