Income Tax - Property Investment Income

Question 1

What is property Income?

What are the two main components of property investment income?

Answer 1

Property income is Income from land and building by treating rent (letting go of the property) as a business!

1. Rents under any lease or tenancy agreement.
2. Premium received on a grant of a short lease

Question 2

Basis of assessment for property investment income?

Answer 2

Accrual basis.

Question 3

Allowable deductions?

Answer 3

1. Insurance or agents fees.
2. Repairs.
3. Interest on loan for purchasing the property.
4. Other management expenses.

Question 4

Incomes not allowed?

Answer 4

Capital expenditure is not allowed to exempt as relief will be given through CAPITAL ALLOWANCES chapter. This means IMPROVEMENT to existing assets are not allowed to be allowed for exemption. It is disallowed.

Question 5

What is wear an tear allowance of 10%?

What is replacement furniture relief?

Answer 5

YES! There is a tax relief of 10% wear and tear calculated as 10% of rental income. OR if there is a council tax and water or business rate use 10% of rental income LESS those rates. Because this is only for wear and tear!

Replacement furniture relief.

1. Replaced furniture less the sales proceeding from old furniture.
2. If replacing a NIL value furniture take the cost of the SIMILAR model price because no relief will be given on an IMPROVEMENT.
3. This does not include any relief for the initial cost of the existing furniture!

Question 6

Is a relief available for revenue expenditure before commencing the letting go of property?

Answer 6

YES up to 7 years.

Question 7

What if there was a property loss?

Answer 7

We just offset it against future profits.

Question 8

Basic rules under property investment income to qualify.

Answer 8

1. Should be available for 210 days in the tax year.
2. Should be let for atleast 50% of those days.
3. No one person occupies for more than 31 days consecutively. If they do it should not exceed more than 165 days in a year.

Question 9

RENT A ROOM RELIEF. Please explain?

Answer 9

Rent a room relief can be claimed for $7500 deductible under gross rent. This can be ignored if the tax payer wants to create a loss.

ORDINARY CALCULATION
Gross rent        xxx
Less - expense (xxx)
Wear and tear allowance (xx)
Property income               ----xxx

ALTERNATIVE CALCULATION (ELECTION)
Gross rent xxx
Rent a room relief (xxx)
Property income xxx

Question 10

When should the election for rent a room relief be made?

Answer 10

On 31 2018 for the tax yea 2016/17.

Question 11

Premiums on grant of lease calculation.

Duration?

What is it?

How is it assessed?

Answer 11

50 years or less.

It is an amount paid by the tenant to the property owner as a one off payment in addition to the annual rent.

The amount of the premium assessed as property income is P* (51-n/50).

Question 12

Trading profit deduction for traders (Opposite side)

Answer 12

He can deduct the premium in years in addition to the rent paid.

This can be calculated as - (Property income assessment on landlord / Life of lease).