Property income Ch 14-15

Question 1

When is cash basis used?

Answer 1

When gross income does not exceed 150k (time apportion for shorter periods i.e if property business started part way through the year)

Question 2

When must election to use accruals basis be made?

Answer 2

31 Jan following the first anniversary of the end of the tax yr (31 jan 2025)

Question 3

Do both couples have to be taxed on the same basis?

Answer 3

If they have made an election to be taxed in line with beneficial entitlement than NO, otherwise YES.

Question 4

Can expenses be apportioned for private use?

Answer 4

Yes

Question 5

What can be deducted in respect of motor expenses?

Answer 5

Actual expenses, or can do the usual flat rate charge (if they do flat rate, must do this consistently year on year)

Question 6

replacing standard glazing with double glazing?

Answer 6

Repair!! due to changes in technology is now seen as the standard so isnt an improvement

Question 7

under the cash basis, when is relief for acquisition of P&M given?

Answer 7

When first acquired (apart from cars-can claim CA on them)

Question 8

when is there relief for the initial cost of domestic items?

Answer 8

FHL

Question 9

Relief for domestic items purchased when residential let?

Answer 9

When replaced (should not be enhancing). If it is enhancing, then relief limited to cost of item that would be considered substantially the same. No relief where there is an element of private use.

Question 10

When is interest relief carried forward?

Answer 10

When the relief is NOT the interest (i.e is property income profit OR adjusted total income at 20%).

Question 11

When loan partially used for private purposes?

Answer 11

That part is not eligible for relief.

Question 12

Exception to the loan partially for private use rule?

Answer 12

When the loan is first introduced into the property business. (eligible for full relief provided the loan does not exceed the capital introduced).

Question 13

What is the statutory restriction to interest relief under the cash basis?

Answer 13

interest paid x value of property when first brought into the business/total outstanding business loans

Question 14

What must happen if there is a change in method used to determine property profits?

Answer 14

Will be adjustment income or adjustment expense so that things arent taxed twice. This is spread over 6 yrs (where moving from cash to accrual basis and there is adjustment income) BUT election can be made to accelerate this.

Question 15

What happens to UK property business losses?

Answer 15

They are pooled

Question 16

What is not an allowable loss?

Answer 16

Loss on nominal lease where the landlord does not charge full rent.

Question 17

When does rent a room relief apply automatically?

Answer 17

When rents <7500

Question 18

When should rent a room relief be elected for/elected to NOT have?

Answer 18

First anniversary of 31 Jan following tax yr

Question 19

Rent-a-room relief if property jointly owned?

Answer 19

Half it

Question 20

How much is property allowance?

Answer 20

1k

Question 21

When is property allowance not available?

Answer 21

-If they have de-elected for rent a room relief but qualify,
-Income from close co in which they are participator,
-Income from ER,
-Income from firm which they are partner
(preventing people from aritficially creating income).

Question 22

Can you still get the interest relief tax reducer if the business is loss making?

Answer 22

YES if one portion of the income is loss making (i.e that specific property) NOT if loss making as a whole property business (if so C/F)

Question 23

What is an overseas property business?

Answer 23

A separate business for losses and for determining accruals/cash NOT for property allowance purposes.

Question 24

Is FHL a separate business for loss and basis purposes?

Answer 24

NO- BUT losses from an ordinary property business can be set off against FHL income but not the other way round.

Question 25

Conditions for FHL

Answer 25

-furnished
-Uk or EEA
-Available for 210 days
-let out for 105 days
(longer term occupation of 31 days rule (155 in total)-unless for VALID/UNFORSEEN reason)

Question 26

What can be elected for if FHL conditions not met?

Answer 26

For it to still be treated as an FHL- if genuine desire to meet the conditions (can do this for 2 tax years).

Question 27

FHL interest deduction?

Answer 27

Full amount

Question 28

FHL capital expenditure for furnitures, fixtures and equipment?

Answer 28

deduction from income under cash basis and via cap allowances under accruals basis.

Question 29

Pension advantages of FHL?

Answer 29

EARNED income (to calc the relevant income bit!!).

Question 30

What if rent is paid to a non UK landlord?

Answer 30

tenant/agent must withold basic rate tax. BUT can apply to recieve the income gross if they have a good tax record and agree to SA.

Question 31

Is FHL income automatically split 50:50?

Answer 31

No

Question 32

What is a short lease for IT and CGT purposes?

Answer 32

less than 50 years

Question 33

Formula to calc the CGT part of a lease?

Answer 33

2% x P x (number of years-1)

Question 34

Additional allowance when doing sub lease calc

Answer 34

Amount chargeable to IT for original landlord x sublease length/head lease length

Question 35

Should you time apportion (for the number of months) if lease done part way through year

Answer 35

NO NO NO

Question 36

Repairs before a property is let out are what?

Answer 36

Capital and not allowable

Question 37

If a lease can be terminated early?

Answer 37

Use the number of years it can be terminated after when doing the calculation

Question 38

When is interest fully deductible as well as FHL?

Answer 38

When it is a commercial letting!

Question 39

Are improvements as tenant has to make included in the cost for lease calc purposes?

Answer 39

YES

Question 40

What can you do if one FHL doesnt qualify as FHL?

Answer 40

Average the number of days for the others

Question 41

What do repairs need to be apportioned for?

Answer 41

Private use of the property by owners

Question 42

cost of repairing or refurbishing a property bought in a derelict or run down state?

Answer 42

capital

Question 43

Are mortgage fees allowable?

Answer 43

Yes-in the same way as the interest bit of the mortgage repayments but does need to be spread across the lease term