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Expenditure on professional fees is deductible from the rental income of a property as revenue expenditure if incurred for the purposes of the rental business. Fees incurred in relation to the purchase and/or sale of a property are deductible as capital expenditure on disposal of the property in the capital gains tax calculation.

Specific legal costs allowed as revenue expenditure:

• Fees incurred on the renewal of a lease if the lease is for less than 50 years (except for any proportion that relates to the payment of a premium on the renewal of a lease).
• Expenses incurred in connection with the first letting if it is for a tenure of less than a year (includes the cost of drawing up the lease, agents’ and surveyors’ fees and commission).
• Expenses incurred on preparing a replacement short lease where it closely follows a previous agreement.
• Costs in relation to rent arbitration and evicting of an unsatisfactory tenant so the property can be re-let.

• Generally, costs are deemed to be a capital expense if they relate to a capital item, such as the actual purchase or sale of the property.

This is a sample tip taken from our 165 page guide:

101 Tax Tips For Landlords 2016/17