Practice Assessment 2 - Q 1.5 - Property income

bolingbrokebolingbroke Registered Posts: 14
Does anyone understand the answer for question 1.5 for practice assessment 2.

For 35 London Street I get 3400
Rent from 1st tenants (1 April, £450, & 1 May £450) £900 and Rent from 2nd tenants (5 months from November at £500) £3500 = £3400 ...extension cost not allowed as a deduction.

The answers give £3450 for that property...can anyone explain?.

Thanks

Comments

  • bolingbrokebolingbroke Registered Posts: 14
    Also Practice assessment 1 - 1.5: Why is Sam allowed to claim the improvement from single glazed windows to double glazed?
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    In terms of your second question, this would be allowed under repair and maintenance as it's classed as a repair. The windows are already in place and are not part of a new build, which would be classed as capital expenditure.

    For your first question, I'm assuming this question relates to Mary, but it's a year since I've taken this exam and my book only shows rent at £450 for the entire year, whereas you are showing £500 from November onwards. Are you able to put the question up and someone will be along to help you.
  • bolingbrokebolingbroke Registered Posts: 14
    edited June 19
    Thanks CornishPixie.

    I can't seem to copy and paste it here but I think I understand it now. For anyone else wondering the same, tax year runs to April 5 so the second tenants will have paid for six months at 500, £3000. The first tenants paid for for two month but were due three so the landlord can write the last 450 as a loss, so just 450 from them, £3450 in total.
  • Welshie999Welshie999 Registered Posts: 8
    As per 2nd post (above). Why is the double glazing allowed as an expense? It's a capital spend, but I can see that it is a replacement. Surely the way to deal with this would be to allow the cost of replacing like-for-like single glazing only (in the same way as the myriad other examples of "Dave bought a better bed for £800 to replace a bed that would have cost £400 new... etc.") and for the excess to be seen as capital expenditure???
  • Welshie999Welshie999 Registered Posts: 8
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    Hi Welshie999

    HMRC decided a few years ago that replacing single-glazed with double glazing is fine to be shown as a repair.

    "Replacing a part of the property with the nearest modern equivalent is still a repair if the improvement is incidental to the repair, such as replacing a single-glazed window with a double-glazed window."

    I've included the link for you below to have a full look at:
    https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-work...

    Hope that helps
  • Welshie999Welshie999 Registered Posts: 8
    Thanks CornishPixie! I don't actually work in the accounting profession (as yet) so bits of corporate knowledge like this are incredibly helpful!

    Kind Regards,
    Welshie
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 101
    I'm 15 months in from qualifying, and absolutely love it. I have to say that it seems I never stop learning. Not given up my day job yet (not in practice but finance officer which has a good pension that I'm building up for a couple more years), but the business is growing well so very pleased with that. Now started offering payroll as well so that has gained me a few more clients!

    AAT give you an excellent grounding into accounting to ensure that you are capable of undertaking all the key tasks but they can't cover every scenario and, trust me, there are so many more than you can imagine. So be prepared to learn a lot more than you know now and, don't forget that help is out there in various forums. All you need to do is ask :)

    I wish you well.
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