Letting fees re long lease, and advertising

by **Incredulum** on Mon Nov 28, 2011 10:58 am

Professional fees regarding the granting of a long lease (in excess of 12 months) are disallowable.

http://www.hmrc.gov.uk/manuals/pimmanual/pim2205.htm

Does this include all associated advertising costs? There was never any intention to grant a short lease.

by **maths** on Mon Nov 28, 2011 2:36 pm

My understanding is that HMRC practice is to deny as a deduction any professional costs which relate to the first letting unless the lease is one year or less.

This would in my view not extend to advertising costs (eg adverts in local newspapers; property magazines).

However, estate agents fees would be disallowable.

by **section 44** on Mon Nov 28, 2011 5:29 pm

I don't see why advertising costs would be any different (i.e. why they would be deductible).

by **Incredulum** on Mon Nov 28, 2011 7:32 pm

HMRC's only guidance on the topic is this:

"LEGAL AND PROFESSIONAL FEES Professional fees are not allowable if they are capital or they are not incurred wholly and exclusively for the purposes of the rental business. Generally, the fees are capital if they relate to a capital matter, such as the purchase of property.

The expenses incurred in connection with the first letting or subletting of a property for more than one year are capital expenditure and therefore not allowable. The expenses include, for example, legal expenses (such as the cost of drawing up the lease), agent’s and surveyor’s fees and commission."

If read literally (and I know it's not legislation) then this only refers to L&P fees incurred in connection with the first letting. This is the only guidance of which I am aware. It is a practice of HMRC's that is generally hated - as all too often they become tax nothings - and of potentially dubious technical backing.

So I agree with both of you, thank you. Not sure what I'm going to do.

by **maths** on Mon Nov 28, 2011 7:36 pm

As far as I am aware there is no case law on this issue (but stand to be corrected).

It may be that HMRC simply adopt the stance that any costs (professional, legal or otherwise) incurred re the lease for one year or more are "capital" which would then presumably include advertising costs on the ground that such costs are putting the land owner in a position to commence his property letting business.

On the other hand pre-trading income which would qualify as deductible if incurred after trading commences may include advertising costs on the ground that such are not "capital".

by **maths** on Mon Nov 28, 2011 7:39 pm

incredulum

Just read you posting.

You could claim (your justification is that they are "revenue" not "capital" ) and make a note in the white space on the return.

by **Incredulum** on Mon Nov 28, 2011 8:06 pm

There are several thousands of pounds worth of costs for brochure printing. The brochures having been prepared by the landlord, not an agent. And a PR firm has been retained. All, of course, in order to find long-term tenants. In no way can brochure printing be described as professional fees.

It really is just advertising in order to get the building into the minds of world. As is the several thousand pounds worth of hospitality (for entertaining agents, search agents etc. etc.) which is definitely disallowable as entertaining.