BTL allowable expenses

[MarkJT]

Hi,

We bought a property in Dec 2019, with the aim of renovating it and then renting it. We have a small number of BTL properties. We are currently renovating it and hope to complete the renovations in August 2020. We are living in the property whilst we renovate, we do not have a "home" property at the moment that we could move into. Normally we would expect to be begin to advertise the property before letting it and moving out. Our plan was to go travelling after we completed the renovations, but owing to Covid-19 our plans are on hold. Our current plans are that we will continue to live in the property until we begin our travels, likely to be during Spring 2021 at the earliest

My questions are around completing our 2019 and 2020 tax year in respect to allowable expenses with regard to this property.

1. We expect to claim our allowable renovations costs up to March 2020. Is this true?
2. What other allowable expenses are we able to claim? Council tax? Water rates? Utility bills such as gas and elec?

Thanks in advance

[jerome.lane]

Provided renovation expenses are in preparation for letting the property, you can claim these against your other property income. You’ll be treading on thin ice if you never let the property. You may decide it’s safer to bring them into account when you add the property to the letting business since it very much looks like purely your own private residence right now. If you add value to the property, it may be tempting to sell and claim CGT relief in the future before it’s ever let.
The council tax and utility costs are for private use save for an element connected to the renovation. A modest proportionate claim should be possible.
It’s also worth noting that if you did have a main residence before, you may have overpaid SDLT when you bought this project. You might also be in breach of a B2L mortgage terms if you live in a property purchased with the intention to let.

[bd6759]

If you buy properties that are in a state of disrepair that require renovation to make them suitable for letting, the costs are capital and not expenditure to deduct against letting income.

This property was purchased to be your home, however temporary. The costs, if revenue, are unlikely to be part of your property business. Cost fail the exclusively rule if there is a dual purpose for the expenditure.