Below are the most common questions we have been asked regarding tax and accountancy. If you cannot find the answer you are looking for, please click here to contact us directly.

Many individuals who are letting a property fall under the misconception that if the expenses cover the rents they receive, then they have nothing to declare to H M Revenue & Customs. Unfortunately, this is not the case.

If you are letting a property and receive rental income then you are required to notify HMRC within 6 months of the end of that tax year. So for example if you commence to let a property in June 2011 you have until 5th October 2012 to inform HMRC. Failure to do so can result in penalties being charged equivalent to the amount of tax liability due on the income.

Depending on the amount of rents you are receiving will depend on whether you will be required to file a self assessment tax return, or whether HMRC can include a restriction in your PAYE tax code to collect the tax due. The self assessment guidelines state that if you have income from property of £2500 (after deducting allowable expenses) you will be required to complete a tax return. However, even if you do not have to file a return, you will still be required to notify HMRC of any rental income you receive below this figure.

Some landlords who do not use a landlords' accounting service believe that if the mortgage payments for the property exceed the rental income received, they will not be required to declare the income as they are not making a profit, but this is not true and the following are areas of concern:

  • Unless a self assessment tax return is submitted annually including the rental income and expenses, they could be losing out on losses arising from the rental property each year which they can then carry forward year on year to set against any future profit arising from rental business. These can mount up and reduce the need to pay tax in the period when a profit first arises.
  • If the mortgage is not an Interest only mortgage then part of the monthly repayments are related to reducing the balance outstanding on the mortgage and as such are capital repayments and not allowed as a deduction against the rental income. Only the actual interest charged can be deducted and as this may be less than the rents received creating a profit that needs to be declared and a charge to tax.
  • If the mortgage includes a re-mortgage amount for items other than related to the rental business e.g. to buy a car, then the amount of the interest related to this additional borrowing is not allowed as a deduction against the rental income.
You want to stay under the VAT threshold, so you need to prove to the VATman that you are an agent working on behalf of the landlords, and are not a re-seller of holiday accommodation.

You should have a written agreement with each of the landlords that clearly states that the landlord is the principal who is making a contract with the holiday-maker, and you are their agent.

All invoices you issue should show your fees as separate items to the cost of the holiday accommodation.

If the holiday-maker pays you for the use of the holiday-let, the bill they pay should clearly show the amount due to the landlord, and the amount due to you as the agent. Ideally the two amounts would be shown on separate invoices.

Yes you can. All your UK property interests are treated as one property business. So the net income from your own properties is amalgamated with your share of income and expenses from the jointly held properties, and the total needs to be reported on the property pages of your tax return. H M Revenue & Customs will not treat jointly held let properties as being a partnership, unless the letting of the property is ancillary to a proper trading business.

With effect from April 2011 to be regarded as a furnished holiday letting the property must be furnished and the letting must meet all three of the following qualifying tests:

  • Available for holiday letting to the public on a commercial basis for 210 days or more; and
  • let commercially for 105 days or more; and
  • let for periods of longer term occupation (more than 31 consecutive days) for not more than 155 days during the year

From April 2012 loss relief against general income and terminal loss relief cannot be claimed for income tax purposes. The loss can only be set against income from the same UK or EEA furnished holiday lettings business.


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