Help - Rental Income??

Rachey Registered Posts: 589 Epic contributor 🐘
Hello everybody, i'm hoping one (or more!) of you lovely well educated people can help/ assist me with the following situation. My apologies if this seems quite basic, however I work full time in industry and just do a little bit of work for a couple of small businesses. Hoping to expand soon, when both kids are at school!

A client is currently renting a property to trade from (no problems, not in the 3 years i've done the books for) The rent is quite high, £800 a month and the upstairs is empty. She's decorated the upstairs and is renting it out to a tattooist. He is paying her half of the rent, £400 a month. She has informed the landlord and he has agreed for her to do that.

1. Should she really be renting out a rented property, even with the landlords permission?

2. If so is it 'rental income'?

3. Are the costs involved in decorating the upstairs allowable costs?

It all seems a little odd to me! I'd personally treat it as rental income and allow the costs. But that would probably be my lack of experience! I cant find a definitive answer anywhere.


  • groundy
    groundy Registered Posts: 495 Dedicated contributor 🦉

    Its fine for your client to sublet the upstairs of the property as long as the landlord has no issue and yes it is rental income and therefore subject to Sch A and not D. Watch for that as I inherited a client were the previous accountant had shown the rental income on the P & L and included in the trade on tax return and therefore class IV was paid when not needed.

    The costs of decorating would be allowable against rental income.

    Hope this helps
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