Chapters 14 & 15: Property Income

Question 1

Property Income

What is a UK Property Business?

Answer 1

A Business Which Generates income from Land in The UK.

Taxed as Non-Savings income.

Question 2

Property Income

What is The ‘Default’ Method of Calculating Property Profits?

Answer 2

The Cash Basis.

Question 3

Property Income

What Can Rental Agents do on Behalf of Landlords?

Answer 3

• Manage the Property; and
• Collect Rent

Question 4

Property Income

When is Income Recognised if a Rental Agent is Present?

Answer 4

The Date it’s Paid to the Agent.

(Not When the Agent Passes it Onto the Landlord)

Question 5

Property Income

When is a Security Deposit Recognised as a Receipt?

Answer 5

When The Landlord Becomes Legally Entitled to Retain All or Part of The Deposit at The End of Tenancy.

Question 6

Property Income

To be Incurred, Expenses Must?

Answer 6

Be ‘Wholly & Exclusively’ For The Letting Business.

Question 7

Property Income

What Are The Flat Rates For Business Mileage?

Answer 7

• First 10,000 - 45p P/Mile
• Thereon - 25p P/Mile

Question 8

Property Income

What Doesn’t the Flat Rate Expense Cover?

Answer 8

Incidental Expenses Associated With Travel.

(e.g., Tolls & Parking Fees)

A Seperate Deduction Can be Made if Incurred For Business Purposes.

Question 9

Property Income

What Rule Applies to The ‘Flat Rate’ Expense Method For Vehicles?

Answer 9

It Must be Claimed Consistently Year-on-Year.

For as Long as The Vehicle Remains in The Business.

Question 10

Property Income

How is Expenditure of a Capital Nature Recognised?

Answer 10

As a Reflection in The Market Value of The Property.

Question 11

Property Income

When Might Capital Expenditure be Classed as a Repair?

Answer 11

Technological Improvements.

(The ‘Standard’)

e.g., Replacement of Single Glazed for Double Glazed Windows.

Question 12

Property Income

When Might a Repair be Classed as Capital Expenditure?

Answer 12

Repairs After Acquisition, to Make The Property Suitable for Letting.

Question 13

Property Income

Which Property Let Can Replacement of Domestic items Relief be Claimed?

Answer 13

Residential Properties.

Question 14

Property Income

Replacement of Domestic Items Relief is Not Available Where:

Answer 14

• The Property is a FHL;
• Rent-a-Room Relief Has Been Claimed; or
• There is an Element of Private Use.

Question 15

Property Income

How is Interest on a Loan to Purchase a Commercial Property or FHL Treated for Tax Purposes?

Answer 15

Deductible in Full in Arriving at Property Income.

Question 16

Property Income

How is Interest on a Loan to Purchase a Residential Property Treated for Tax Purposes?

Answer 16

The Interest is Eligible for Basic Rate Relief as a Reduction in the Tax Liability.

Question 17

Property Income

The Relief for Loan Interest at Basic Rate is Available on the Lowest of:

Answer 17

• The Eligible Interest;
• Property Income Less Losses b/fwd; or
• Adjusted Total Income (Non-Savings Income Less PA).

Question 18

Property Income

How are Property Business Losses Treated for Tax Purposes?

Answer 18

• ‘Pooled’ Together.
• A £nil Property Income Figure in Tax Comp.
• Loss is c/fwd Against UK Property Business.

Question 19

Property Income

What is a Nominal Lease?

Answer 19

Where a Landlord Doesn’t Charge Full Market Rent.

Losses Aren’t Allowable in This Situation.

Question 20

Property Income

What is The Property Allowance?

Answer 20

£1,000 Per Person.

Question 21

Property Income

When Gross Property Income is < £1,000:

Answer 21

• There is No Charge to Income Tax; and
• Notification to HMRC of The Property Business is Not Required.

Question 22

Property Income

In What Situation Should The Property Allowance be Claimed?

Answer 22

When Expenditure of The Property Business is < £1,000.

Question 23

Property Income

What Can’t The Property Allowance be Claimed With?

Answer 23

The Interest Tax Reducer.

Question 24

Property Income

What is The ‘Letting’ Condition?

Answer 24

The Property Must Actually Let for At Least 105 Days or More as Holiday Occupation.

No Long-Term Occupation - Period of Continuous Occupation > 31 Days.

Question 25

Property Income

The Letting Condition Can be Met by Making What Election?

Answer 25

To Average the Periods of Occupation For Any/All of The FHLs.

Question 26

Property Income

What are Some Advantages of FHLs?

Answer 26

• Interest on a Loan to Purchase a FHL is Deductible in Full.
• Income Qualifies as Earnings for Pension Purposes.
• Various CGT Reliefs Available on Disposal (e.g., Gift Relief & BADR).

Question 27

Property Income

What Does ‘REITs’ Stand For?

Answer 27

Real Estate Investment Trusts.

Question 28

Property Income

Dividends Paid to Shareholders are Treated as Non-Savings Income if:

Answer 28

• The Dividend is Paid by a UK-REIT; and
• Comes From Tax-Exempt Income or Gains.

If Paid From Other Profits - Treat as ‘Normal’ Dividend Income.

Question 29

Property Income

What do Dividends Paid From REITs Carry?

Answer 29

A Basic Rate (20%) Tax Credit.

(incl. Stock Dividends)

Repayable to Non-Taxpayers.

Question 30

Property Income

Does the Property Allowance Apply to REIT Income?

Answer 30

No - Not Relevant Property Income.