SA first timer - advice greatly appreciated!

[jemmy]

Hi,
I am in the process of completing my first ever SA for '09/10 but it was a VERY complicated year for us – I have done our accounts and have researched IR website & this forum (fantastic forum btw). I do however have a few outstanding queries and assumptions I have made that I would really appreciate some advice on?

In a nutshell.....we purchased House 2 (joint name), moved out of our first house 1 (in husbands sole name) and let it to friends, all exchanged on April 8. Husband then had job offer abroad so we moved out of the UK Jan 8. Husband left his employer for career brk, I went on maternity leave as heavily pregnant. House 2 was put on rental market immediately but was not however let until June. House 2 was empty and on rental market from Jan-May. We have completed our NRL & P85 and have been asked to self declare.

The issues I am a little unsure about
1) I plan to include on our tax returns a loss on House 2 (zero income offset by loan interest repaymts). I know there has been debate about this on the forum but I am willing to argue this.

2) For house 1, we bought a few furniture items & paint etc at time of initial rental and know we cannot include these as expenses however – 3 weeks after property was rented out we had to replace the shower and shower unit due to a large leak (same standard). I want to include this as replacement expense. Could this be problematic?

3) House 2 was professionally cleaned after we moved out (Jan 23) when house was on market, is this claimable?

4) Gas & Electricty checks – which expenditure category do these fall under? Is it 'property expenses'?

5) My tax return will only really include my PAYE info and the 3 mth loss on House 2 – is this loss to be carried forward to 2010/11?

Any thoughts / comments on the above would be gratefully recieved, as you can see its been a heck of a year and I am now getting stressed as the time before my SA is due is short!

[TaxationPete]

House two appears to not have entered your rental business in FY 09/10. Until it was let it was not in your rental business.
Is house one rented out furnished and are you claiming the 10% wear and tear. It would initially sound as though the shower was already defective/worn out before you rented the property out. You could claim it but be prepared for questions from HMRC. Regards Peter

[jemmy]

House 1 is part furnished, hence no W&T allowance. I see your point about the shower...

Regarding House 2, why should it not have entered our rental business? Surely a business is not only termed 'a business' when it starts to make money? PIM 2505 states that it is when the taxpayer 'begins' to exploit property for first time. Putting the house on the rental market with the property in a state ready for immediate tenants should constitute exploiting the property. We can provide evidence that the house was on the rental market from 8th Jan with the property vacant.

Quote PIM2505 ["The question of when a rental business starts normally only arises, therefore, when a taxpayer receives income from property for the first time, or begins to exploit their land and property for a profit for the first time"]

Thanks - jemmy

[Telometer]

I agree with you and disagree with Pete as to the time from which an interest deduction is due.