F6 taxation-7.pdfVIP

Scope of charge ? Rents receivable on lets in the UK Property income Basis of assessment ? Accrual basis, actual payment is not relevant here. Rent received under any lease agreement Premium received on the grant of a short lease 1.Scope of rents 2.Scope of expenses Expenses are allowable provided they are wholly and exclusively for the purpose of the property business, e.g.: 1. Insurance 2. Agent?s fees Advertising 3. Council tax paid by landlord 4. Water rates paid by landlord 5. Repairs Redecorations (Revenue Expenditure) 6. Specific bad debts (tenants leave without payment) 7. Interest on a loan to purchase the property 8. Extra deduction on furnished properties: wear and tear allowance= 10% x (rent accrued - council tax - water rates paid by landlord) Lecture example Over the last few years Peter has purchased several residential properties in Manchester as buy to let? investments. 5 Whitby Ave is let out furnished at ￡500 per month. A tenant moved in on 1 March 2012 but left unexpectedly on 1 May 2013 having paid rent only up to 31 December 2012. The tenant left no forwarding address. 17 Bolton Rd has been let furnished to the same tenant for a number of years at ￡800 per month. A recent purchase, 27 Turner Close, has been let unfurnished since 1 August 2012 at ￡750 per month. Before then, it had been empty whilst Peter redecorated it after its purchase in March 2012. Petes expenses during 2012/13 are: No 5 No 17 No 27 ￡ ￡ ￡ Insurance 250 250 200 Letting agency fees – – 100 Repairs 300 40 – Redecoration – – 500 No 27 was in a fit state to let when Peter bought it but he wanted to redecorate the property as he felt this would allow him to achieve