Cashback on flat purchase counted as income in a rental business?

[Liz1970]

I bought an investment property in the last tax year and now need to complete the tax return.

I have 2 questions:
1. Does a 500 pound cashback from the builder count as income (I suspect it falls into the “reverse premiums” category)
2. The builder provided us with 1000 pounds compensation as a result of poor service. We gave 250 pounds to a homeless charity. Does this compensation need to be declared, and if so, do we declare the gross figure (1000 pounds) or the net (750 pounds)?

If any tax adviser would offer a service to perform a simple review of figures, I would be interested to hear from them.

Thanks in advance

Liz

[Ian McTernan CTA]

Both these figures sound to be capital in nature, so they will be deducted from the purchase price when computing the CGT when you sell in due course, rather than affecting the rental income in any way.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com

[TSL]

Liz

I agree with Ian's thoughts that this is not 'income' in your hands, but infact monies that will reduce the base cost of the house for capital gains tax purposes.

I specialise in the area of property taxation and if you require any assistance with your rental accounts and self-assessment tax return please get in touch.

Jason Sharp
Taxation Solutions
www.propertytaxation.co.uk
Tel: 0800 0274533