Chapter 14 - Property Income Flashcards
True or false
Premiums on leases are taxed as property income
True
What is the threshold for the cash basis?
£150,000
If the business is carried on for part of the year, this is reduced proportionately
Where a taxpayer makes an election to use the accruals basis, when is the deadline for this?
31 January following the end of the tax year for which the election is made
When are income & expenses accounted for under the cash basis?
When they are paid / received
True or false
The accruals basis involves taking rents RECEIVABLE rather than rents received
True
From rents receivable we deduct allowable expenses payable to arrive at property income profit (or loss)
When are expenses deductible?
When they are incurred wholly & exclusively for the business of the letting
How do you deduct deductible expenses under the cash basis?
Deduct the amount of allowable expenses ACTUALLY paid in the tax year
How do you deduct deductible expenses under the accruals basis?
Deduct the amount of expenses that are payable in the tax year regardless of when they are paid
When a landlord acquires a vehicle that will be used for property business, what can they chose to deduct?
- The proportion of actual motor expenses
OR
- a flat rate expense
What is the flat rate for cars / vans?
first 10k miles - 45p
additional miles - 25p
What is the flat rate for motorcycles?
first 10k miles - 24p
additional miles - 24p
Is capital expenditure, such as that which improves a property, deductible?
No, unless for plant & machinery
Is revenue expenditure deductible?
Yes, it is an expense
True or false
Under the accruals basis, capital allowances may be claimed in respect of capital expenditure on plant & machinery
True
How is relief for capital expenditure on plant & machinery calculated under the cash basis? can capital allowances be claimed?
The cost of the asset is deducted when it is acquired - as such, capital allowances cannot be claimed
Can capital allowances be claimed under the cash basis for cars?
Yes
True or false
Relief cannot be claimed for the cost of replacing domestic items used in a let property
False
Relief can be claimed under both the cash & accruals basis - however, this relief is not available where the property is a furnished holiday let
Will relief be available on the interest paid on a loan to purchase a property?
Yes, provided the loan is wholly & exclusively in relation to the let property
How do you treat the interest for a commercial or furnished holiday let property?
It is deducted in full to arrive at the property income
True or false
Loan interest for a residential property is only eligible for higher rate tax relief which is given as a reduction
False
Loan interest is only eligible for basic rate tax relief
Per loan interest for a residential property, what is relief at the basic rate available to the lowest of?
- the eligible interest
- the property income for the year less property losses brought forward
- adjusted total income (net income less savings, dividends & PA)
How do you insert a property loss in a tax comp?
As a nil
What happens when a lease is nominal?
The expenses incurred in relation to the let are only allowable up to a max of the rents received - no loss will arise
What is the rent a room relief?
£7,500
What are the key points on rent a room reliefs?
- the £7,500 threshold applies per property, not per tenant
- if a property is joint owned, half the limit is given to each joint owner
- it does not affect the availability of private residence relief
What is the property allowance per tax year?
£1,000
Does relevant property income include income on which rent a room allowance has been claimed?
No
How do you calculate relevant property income?
gross property income before deduction of expenses
