Chapter 8 Property Income

Question 1

8.2 Expenses

Answer 1

Relief is given for expenses which have been incurred wholly and exclusively for the purposes of the rental business. Common deductible expenses are:
• Maintenance and repair expenditure
• Insurance
• Management and agents’ fees
• Rent collection costs
• Advertising for tenants
• The cost of replacing domestic items – where the item replaced is the same, the full expenditure is allowed. If the item is an improvement, the deduction is limited to the cost of an item that would be considered the same. The deduction is increased by incidental expenditure on the disposal of the old item and purchase of the new
• Capital allowances in respect of capital expenditure on domestic items in furnished holiday accommodation

Question 2

8.3 Loan interest

Answer 2

Interest on a loan taken out to purchase a rental property is not an allowable expense in arriving at income taxed as profits from a property business. The loan interest is treated as non-trading loan relationship expenses, under the loan relationship rules.