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UK-resident landlords are generally taxed on rental profits made wherever the properties are situated in the world.

A record of the rental income, expenses incurred and capital items purchased must be kept. Separate sets of records are needed if the properties are let as ‘furnished holiday lets’ because these properties are taxed under different tax rules.

Keep:

• invoices, expense and capital item receipts, rental statements;
• past years’ income and expenditure accounts and Tax Returns submitted;
• bank statements;
• details of purchase of property – date of acquisition, purchase price including associated costs; and
• if the property was previously the landlord’s main residence, details of periods when the landlord lived in the property and of periods let – to ensure Principal Private Residence and letting relief are correctly claimed on sale.

NOTE: In the recent Tribunal case of Ridpath (Ridpath v HMRC (2013)) a total of £40,000 had been spent on property improvements. Although the First Tier Tribunal agreed that the costs had likely been incurred, it was impossible to define precisely how much had been spent being that there was no proof of the expenditure and therefore the claim was disallowed.

Record Keeping
Keep records manually, using spreadsheets or software packages, for example:

• Landlords Property Manager

www.propertyportfoliosoftware.co.uk

 

• Landlord Vision

www.landlordvision.co.uk

HMRC have an index of the record-keeping requirements for a business at www.hmrc.gov.uk/recordkeeping/index.htm.

A penalty of up to £3,000 can be imposed by HMRC for failure to maintain adequate records for self-assessment purposes.