Letting expenses - can I add selling expenses ?

[janice2006]

It have taken 5 years to negotiate planning permission and a change of covenant of our property. Meanwhile we let it. We have deducted standard expenses from income and paid the resultants tax. We now have significant costs of architects and solicitors. Can we charge any of these against the rental income ? We are now trying to selling the property for development. Can the agents selling fees be offset against the rental ?

[mullet]

Costs associated with planning, covenants and appeals etc are capital in nature and therefore deductible against the capital gain arising on disposal. If your gain is wiped out by private residence relief and lettings relief, then such costs will still be deductible but would leave a lower gain subject to relief. If you have no taxable figure (for want of a better term) from which to deduct the costs, you cannot then deduct them from letting income - because they are still capital in nature.

[mullet]

And the agent's selling fees are also capital and deducted from the capital gain before reliefs. (Sorry, missed that bit).

[maths]

What if the activity undertaken is in fact that of trading?

[Incredulum]

It have taken 5 years to negotiate planning permission and a change of covenant of our property.

Tell us more. How long have you owned it? Why did you acquire it? Did you ever live in it?