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Self assessment: Property income

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 117419

Hello all,

A client has moved and has been renting out what was previously the family home. There were a number of repairs undertaken to the property in the last tax year and when I input the property income and expenditure figures into the client's tax return HMRC flags up the following:

  "WARNING: This figure is high in relation to 'Total rents and other income from property'. Read Help"

I was wondering if anyone knows what the implications of this are? E.g. is it more likely that HMRC may ask for more information or carry out a tax investigation on the client (not something I've experienced previously!)

In line with HMRC guidance, expenditure that was restoring to the original condition has been treated as allowable, whereas anything which has improved the property, or provided something new has not been included, so to the best of my understanding the expenditure is legitimate. 

Many thanks,

Sally

  • Member
  • Practice Licence
  • 164 posts
  • # 117479

Hi Sally,

Ive had this happen before and I put a note in the additional information box explaining why expenses were high ie due to costs preparing property for rental. If tax return is flagged at least theres an explanation and possibly no need for HMRC to query further.

Alternatively instead of separating expenses into different groups there is an option to put all expenses into the last box, with the exception of mortgage interest/finance, which must be put in the appropriate box. This stops the warning popping up. 

 

Regards

Gary

 

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 117494

Thanks very much Gary, that's really helpful. I'll do as you suggest and include a note.

Cheers,

Sally

 


 

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