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Where Taxpayers and Advisers Meet

Refurbishment cost prior to letting

andrewlato81
Posts: 5
Joined: Sun May 15, 2016 10:28 pm

Refurbishment cost prior to letting

Postby andrewlato81 » Wed Dec 05, 2018 11:54 am

Hi all,

I have bought two BTL in mid 2017 jointly with my wife on 50/50 basis. Both properties have had full refurbs prior to letting with a lot of my own labour and only tradesman involved sparky,plumber and gas eng. There is a lot of material costs circa £10k per property used to bring it up to standard. Properties have been let from end of 2017. Now is the time to submit first accounts to HMRC.

1. I understand that all material costs used for refurbishment will be classed as allowable expenses- do I add them together and split equaly in two or do I need to seperate them for what accually was spend on each one of the properties?

2. I also understand that costs of solicitors, mortgage, advertisment, SDLT are to be used at the point of sale as way of reducing CGT- right?

3. I am employed on circa £40k, but my wife has an income of less than £1 a year.
The rental profits are to be split 50/50- do we split the losses also 50/50? And does my wife need to be registered for SA for year 17/18 as it apperas there will be substantial loss in first year due too high costs of refurbishments? If not- how can she use the loss from 17/18 against future profits from property if no record is held by HMRC.

4. I have heard about HMRC Form 17, can it be used to give my wife 100% of all profits/losses from the BTL so she can use her tax free allowance to the full in the future, rather than me having to scratch 40% tax bracket(from year 2021 I recon)?

5. Can cost of tools bought by myself and used for refurbs be offset against profits and also my own labour(a lot of it) be somewhat deducted?

Many thanks
Andre

AdamS93
Posts: 185
Joined: Tue Sep 26, 2017 6:28 pm

Re: Refurbishment cost prior to letting

Postby AdamS93 » Wed Dec 05, 2018 6:38 pm

1) depending on the situation, the cost of the initial refurbishments could (the way you have worded it I would say probably) be treated as capital expenditure and therefore not an allowable expense.

2) yes, SDLT, legal fees and so on are capital expenditure

3) the profits and losses are split based on beneficial ownership. Any losses cannot be offset against your other income.

4) form 17 cannot be used in your case. Form 17 is only used to notify HMRC if the beneficial interest is somthing other than 50:50 which isn’t the case here.

5) it depends.

6) you should get an accountant for at least the first year or two. There are some significant tax saving opportunities here if you know what you’re doing!

andrewlato81
Posts: 5
Joined: Sun May 15, 2016 10:28 pm

Re: Refurbishment cost prior to letting

Postby andrewlato81 » Wed Dec 05, 2018 11:15 pm

Hi all,
Thank you Adam,

The problem is that my last accountant (chartered by the way) messed up everything he could have messed up in year one of my other SA, then he blamed his employee who no longer works there :evil:
Therefore I'd like to have a go myself at this years SA, and I'm hoping Tax forum community can help me gather some information on best approach,

andrewlato81
Posts: 5
Joined: Sun May 15, 2016 10:28 pm

Re: Refurbishment cost prior to letting

Postby andrewlato81 » Sat Dec 08, 2018 1:42 pm

One more questions-Does my wife need to file SA for 2017/18 if she had an income(PAYE) of approx £4k, then income £3k from property rentals but refurbishment costs will dwarf that creating loss from property side of business.

I see that the deadline for registering for SA was 5th October, is she now facing penalty?

Or can SA for that tax year be omitted due to low income and loss on rental side?

Thank you

bd6759
Posts: 2924
Joined: Sat Feb 01, 2014 3:26 pm

Re: Refurbishment cost prior to letting

Postby bd6759 » Sat Dec 08, 2018 7:26 pm

£3k from property rentals but refurbishment costs will dwarf that creating loss from property side of business.
As advised by Adam, the refurbishment costs are unlikely to be an allowable expense.
I see that the deadline for registering for SA was 5th October, is she now facing penalty?
Her only responsibility is to notify HMRC if she liable to tax. If her income is less than her personal allowance, there will be no liability and no obligation to notify.


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