Tax question - First time landlord

[Egathetos]

I have 2 rather simple questions and I hope that someone can help me to clarify them.

I have started renting a furnished flat and it is this time of the year when I need to do a tax return. The rent I receive is 750 per month (750 x 12 = £9,000 per year).

Question 1 - Am I right in understanding that in my tax return I can claim 10% of wear and tear (£900) as part of the costs? I have no interest in capital allowance.

Question 2 - The agency is charging me 10% plus VAT (total for the year £900 + £180 VAT). Do I record as an expense the whole amount (£1080) or just the £900. I am not VAT registered or anything like that. I only have a salary.

I hope that someone can clarify the above points and I thank you in advance.

[Acura]

I have 2 rather simple questions and I hope that someone can help me to clarify them.

I have started renting a furnished flat and it is this time of the year when I need to do a tax return. The rent I receive is 750 per month (750 x 12 = £9,000 per year).

Question 1 - Am I right in understanding that in my tax return I can claim 10% of wear and tear (£900) as part of the costs? I have no interest in capital allowance.

Question 2 - The agency is charging me 10% plus VAT (total for the year £900 + £180 VAT). Do I record as an expense the whole amount (£1080) or just the £900. I am not VAT registered or anything like that. I only have a salary.

I hope that someone can clarify the above points and I thank you in advance.

Hi Egatheots

You can claim 10% wear and tear on furnished properties only. More info here http://www.hmrc.gov.uk/manuals/pimmanual/pim3200.htm

And as for your second question, my mind has gone blank so don't take my word for it, but I do believe my accountant puts the whole amount through as an expense.

[Grampa]

This may be a silly question but if you rent a property with just a few items of furniture such as a fridge and a couple a chairs etc does that mean you can then claim a wear and tear allowance of 10% of the net rent?

[Acura]

This may be a silly question but if you rent a property with just a few items of furniture such as a fridge and a couple a chairs etc does that mean you can then claim a wear and tear allowance of 10% of the net rent?

According to my accountant - technically, no. A "furnished" accommodation needs to be fully furnished. Once upon a time Landlords were getting away with claiming a fridge and a few bits as furnished, but it's not, and if caught out you'd be fined.

[Grampa]

I am not suggesting anyone breaks the law but how would you get caught unless it was a random check?

[Richlist]

You'd get caught the same way that you would if you were fiddling your tax returns.

HMRC carry out audits on a small number of landlords each year and its not difficult for them to discover if its really a furnished property......

* they might ask you to provide a copy of the inventory.

* they might ask your lettings agent if its let furnished or unfurnished.

* they might check with council tax to see the situation in the void period.

* they might ask to see the advertising media.

* they might talk to the tenant.

* I guess in extreme cases they mmight visit the property.

I suspect that there are a lot of people claiming the 10% tax relief when their properties are not fully furnished.