Queries on Property Rental

jenny3549jenny3549 Trusted RegularPosts: 472Registered
Hi All,

Really hoping for some advice from you guys. I'll try not to make this too long winded!

A friend of mine already has one property that she rents out. She has just purchased another property on a buy to let mortgage which she intends to do up before renting out (the bank are aware that she estimates the timescale at about 8 months).

I have a couple of questions if I may?

I am aware that the cost of refurbing the property would be capital expenditure as it will be done before the property is let out (it was owner occupied previously) but is there anything at all that she would be able to treat as revenue expenditure? She is thinking along the lines of things that would normally be allowed during the course of letting such as replacing the hideous bright blue bathroom suite with a plain white one or replacing the rotten kitchen window. Or, is it the case that, because this is all being done before any tenants move in, none of it can be offset?

Also, since she will be taking approx 8 months to complete the work, is there anything preventing the claiming of the mortgage interest, Council Tax (once exemption has run out), water rates etc?

On a slightly different note, she has not yet registered for self assessment. I have told her that she needs to contact HMRC asap for a UTR number but she has asked me what kind of questions they will ask her when she does. I have absolutely no idea! Anyone have any experience here?

It appears that she has been renting the first property out for a few years without declaring it. I have told her that she needs to tell HMRC this and submit returns for the missing years but she is loath to do this. Since I am not acting for her I can only give my advice as a friend. At least she does want to 'go legit' now (as she puts it) so that's something I suppose.

She has just taken a buy to let mortgage on the rented property also (it was owned by her outright previously) so wants to take this point to start everything off.

Sorry, this did end up fairly long-winded!

Any help gratefully received. :)

Jenny

Comments

  • T.C.T.C. Experienced Mentor Posts: 1,448Registered, Tutor
    Firstly, the refurbishment works should all be capitalised. The mortgage interest can be claimed as revenue expense.
    When she calls HMRC they will simply ask her why she wants to register for self-assessment and what sort of turnover she is expecting - nothing more than that.
    She should declare the previous years' earnings or risk 'getting caught', but you can only advise.
    I would advise her to get an accountant!!! No more free advice..friend or not!
  • jenny3549jenny3549 Trusted Regular Posts: 472Registered
    T.C. wrote: »
    Firstly, the refurbishment works should all be capitalised. The mortgage interest can be claimed as revenue expense.
    When she calls HMRC they will simply ask her why she wants to register for self-assessment and what sort of turnover she is expecting - nothing more than that.
    She should declare the previous years' earnings or risk 'getting caught', but you can only advise.
    I would advise her to get an accountant!!! No more free advice..friend or not!

    Thanks TC!

    I was fairly sure she wouldn't be able to include any of the works but, since this is not my area, wanted to check to be sure in case there was something she could include.

    I have told her very clearly that she needs to declare the previous years and even said that the Revenue are far more lenient with people who approach them than they are if they come to you! But, as you say, I can only advise. I've also told her that she should get herself an accountant but I think that me saying 'if I was your accountant I would have to advise you to declare the previous years' means she will probably ignore me!

    It's a pain when it's someone you know - they seem to think you'll be able to find ways for them to get round the rules!
  • T.C.T.C. Experienced Mentor Posts: 1,448Registered, Tutor
    You are doing the right thing. Basic advice and then let your friend do as she sees fit....or mess up....whichever is the case.
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