Personal Taxation Query/

Pigpen

Hi All
I am a little confused - Trying to do a test paper and the details of rental Income are as follows

"" Rental Income due £26400 (Of which £23100 actually received in the year, £1100.00 is not recoverable) ""

Well I know you have to use the accrued amount of rental income and not what was received i.e £26400 but what does the "of which £1100 is not recoverable" mean - What do I do with this?

I have re-read my books and just don't understand - Stuck now ?

Doh! Anyone got a clue? :crying:

Emma1708

You would use £25300 as the rental income - which is the amount due less the 'bad debt' figure of £1100. You ignore when it has been received as rent is treated on an accruals basis

Hope this helps

Emma1708

Sorry, just realised you said you already knew it was on an accrual basis - I didnt read your post properly!

Like I said though, the £1100 is a bad debt so can be deducted when calculating the amount assessable for tax purposes

Pigpen

Thanks Emma - Thats what I had done

Next question - Is the wear and tear allowance of 10% then calculated on the Figure before or after deducting the bad debt?

Emma1708

I cant find anything in my notes about that. However I would do it afterwards as I have 'W&T = 10% of assessable rent after rates and council tax deducted' and I would presume the assessable rent to be after the bad debt amount has been taken off.

If I find anything during my revision either way I will post on here.

Out of interest, which paper are you doing?

x

Pigpen

Hi There

Its a BPP Course Examination 2 - The one you sit once you have finished the text book and then post into them

I just asked my FD and he said that he would deduct it on the accrued figure before the loss as it is specifically a wear and tear allowance and so should be on all rental due/accrued in the period as a tenant must have been living there and so wear and tear was "happening" if you get my meaning. The fact that he later didn't pay for whatever reason is irrelevant - according to him anyway. I can kinda see his point.

Emma1708

That makes sense. Thanks for that