Ch.14 Intro to Property Income Flashcards
Report on which basis if <£150,000?
Report Cash Basis (can elect for accruals)
This makes sense if Accrual in past to avoid double tax or to avoid change if receipts fall below £150,000.
Where £150,000 or greater, which basis to report?
Report Accruals basis (cannot elect for cash)
What is the cash basis?
Reporting income as received or paid.
What is the accruals basis?
Reporting income receivable/due. (may not be physically received at the same time)
What are deductible expenses?
Expenses are incurred ‘wholly and
exclusively’ for the business of the letting.
Water, council tax and insurance premiums are deductible.
What types of relief are given for in a property business? (2 answers)
Vehicle motor expenses relief.
Mortgage/loan interest.
What happens if an expense has both a business and private use?
HMRC will allow a deduction for a proportion of the
expense where a definite part of it is wholly and exclusively for the rental business.
What are the 2 options for deduction in terms of motor expenses?
1) The proportion of actual motor expenses attributable to the property business.
2) A flat rate (45p for 10,000 miles, 25p thereafter)
Can add incidental expenses for business use, e.g. parking/tolls.
Once flat rate is used for a vehicle, it must be claimed thereafter.
Is capital expenditure deductible?
No because it results in an asset. (can become deducible for plant and machinery)
Is capital expenditure deductible?
No because it results in an asset. (can become deducible for plant and machinery)
What s revenue expenditure?
Revenue expenditure is an expense, and if it is allowable is deductible when calculating property income.
E.g. genuine repairs, or replacement (single to double glazing)
Are repairs after purchase deductable?
No, this is capital expenditure as it is part of the asset.
Repairs and maintenance after or during a tenancy is revenue expenditure as these are to get the property to the same standard as before the tenancy.
Is the cost of initial furnishing deductible?
No, The cost of the provision of furnishings and other items in a property is capital expenditure.
This includes free standing white goods.
Are attached items to the building deductible?
Conditions?
Yes, When the item is repaired or replaced, the expenditure is treated as a repair to the building.
This includes items such as baths, toilets, washbasins and kitchen units.
Requires the replacement to be or similar standard/character. (cannot be a huge upgrade)
If repairs are covered by insurance, what (if anything) can be deducted?
Only the cost in excess of the insurance proceeds.
