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Where Taxpayers and Advisers Meet

expenses and management fees

tonasc
Posts:2
Joined:Fri May 29, 2020 1:53 pm
expenses and management fees

Postby tonasc » Fri May 29, 2020 1:56 pm

Hi.

I used a letting agent to manage my property. On my self-assesment, do

1) lock replacement, initial cleaning cost, end of tenancy cleaning cost go under "Property repairs and maintenance"
2) Letting agent set-up fee and monthly management fees go under "Legal, management and other professional fees"?

Thanks

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: expenses and management fees

Postby jerome.lane » Fri May 29, 2020 5:29 pm

You got it!
Jerome Lane
Tax Adviser
Telephone: 07943 005902

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: expenses and management fees

Postby jerome.lane » Fri May 29, 2020 5:33 pm

With the caveat that the expenses incurred for first letting a property for more than one year are capital expenditure and not allowable. Expenses for a let of a year or less can be deducted. Allowable expenses include costs for drafting a tenancy agreement as well as agent’s fees and commission.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: expenses and management fees

Postby bd6759 » Sat May 30, 2020 4:49 pm

With the caveat that the expenses incurred for first letting a property for more than one year are capital expenditure and not allowable. Expenses for a let of a year or less can be deducted. Allowable expenses include costs for drafting a tenancy agreement as well as agent’s fees and commission.
Pre-trading expenses are usually allowable (s57 ITTOIA). I am not aware of any provision that converts revenue expenditure into capital expenditure based on the length of a tenancy agreement.

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: expenses and management fees

Postby jerome.lane » Sat May 30, 2020 5:20 pm

With the caveat that the expenses incurred for first letting a property for more than one year are capital expenditure and not allowable. Expenses for a let of a year or less can be deducted. Allowable expenses include costs for drafting a tenancy agreement as well as agent’s fees and commission.
Pre-trading expenses are usually allowable (s57 ITTOIA). I am not aware of any provision that converts revenue expenditure into capital expenditure based on the length of a tenancy agreement.
HMRC have some funny ideas :P

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2120

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. Expenses for a let of a year or less can be deducted.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: expenses and management fees

Postby bd6759 » Sun May 31, 2020 1:03 am

I suppose the costs of granting a lease, rather than a tenancy, could be capital.
The pre trading costs of a residential tenancy will almost always be revenue costs.

helpneeded
Posts:7
Joined:Wed Jan 30, 2013 3:09 pm

Re: expenses and management fees

Postby helpneeded » Thu Jan 27, 2022 1:04 pm

Hi Jerome, I paid a finder's fee of ca. £4,000 followed by 2 further fees to a property finder for a btl flat in Slovakia. The payments were all well within 7 years of the first letting. The first letting was for a period of 2 years, and, of course, there were then subsequent lettings. Question 1: reading your post and having read the part of the manual you refer to, is it correct that the fact that the initial letting was over a period greater than 1 year rules out my making a revenue claim for the outay? (It's a strange rule, since, even if the first letting had been for under a year, the whole purpose of the btl is to let out the flat for as many periods and as long as possible which means that if I'd let it out for ony 6 months initially I could claim these pre-letting costs as revenue, although I would certainly have done my level best to find another tenant immediately thereafter.) Question 2: as I cannot claim for revuenue costs now, will I be able to claim them against CGT when I eventually sell the flat. Thanks.

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: expenses and management fees

Postby bd6759 » Fri Jan 28, 2022 1:23 am

Finders fees are not allowable costs for setting against income, regardless of the length of tenancy.

helpneeded
Posts:7
Joined:Wed Jan 30, 2013 3:09 pm

Re: expenses and management fees

Postby helpneeded » Fri Jan 28, 2022 10:56 am

Thanks for the reply, bd6759. I have a suppementary question: will I be able to offset the finder's fee against UK CGT when I eventualy come to sell the flat? And a couple of new questions: pre-letting I visited Slovakia to meet my lender and the guy who was arranging the interior design of the flat (it was a new build), can I offset these expenses, i.e. the flights and 1 night's hotel stay against revenue? I was there for longer than 1 night, but I don't suppose hmrc will allow more than that, if they allow the claim at all). Pre-letting, I also paid a fee to a mortgage broker to arrange the loan on the flat, will this be an allowable expense? And if these additional costs are not chargeabe against revenue, will I be able to charge them against UK CGT when I eventually come to sell the flat? Thanks very much for your help.

bd6759
Posts:3745
Joined:Sat Feb 01, 2014 3:26 pm

Re: expenses and management fees

Postby bd6759 » Fri Jan 28, 2022 12:10 pm

Finders fee will be CGT deduction if wholly applicable to the acquisition of the property.

Costs of travelling not solely for purpose of rent, so not deductible.

Mortgage fee is incidental cost of loan finance.

It’s not “either/or”. Revenue and capital deductions each have own rules.


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