I have just started letting out a cottage and have incurred a fair amount of "capital" expenditure to get the property ready.
I've looked at the HMRC criteria on FHL and I understand that one can have up to two periods of grace in a row should lettings fall short of the 105 night p.a. threshold.
I am unlikely to get to 105 in the first year so will elect for my first period of grace.
Do contributors know whether or not this means that I can claim capital allowances (possibly up to 100%) in the first year and carry this loss forward indefinitely, regardless of whether it achieves the 105 nights criteria in future years?
Apologies for the tedious posting and congratulations if you've read this far without nodding off.
FHL tax criteria
Does this help at all? I can't answer specifically as mine has always fulfilled the criteria. Francis Clark is a good authority on FHL so tends to know their stuff. http://www.francisclark.co.uk/files/doc ... ingsJE.pdf
Many thanks. That's a v useful overview.
It doesn't quite answer the question unfortunately (can a loss arising from capital expenditure in year one (a "grace" year) be carried forward indefinitely even if the property is never classified as FHL?) but it's a v useful overview.
I think I'll hand the problem over to some accountants!
Many thanks again.
It doesn't quite answer the question unfortunately (can a loss arising from capital expenditure in year one (a "grace" year) be carried forward indefinitely even if the property is never classified as FHL?) but it's a v useful overview.
I think I'll hand the problem over to some accountants!
Many thanks again.
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OrangeBlossom
- Posts: 44
- Joined: Tue Dec 30, 2014 12:03 am
- Location: Tavira, Algarve, Portugal
FHL query followup
Hi,
I have had the same query as Ludwig. Did you ever get a definitive answer L? If so, can you report here? I guess it might be worth giving HMRC a ring, if not.
I'm also wondering about what to state as the date of the start of the business, for 'Election' purposes.
You can have pre-business expenses, can't you, so I don't think you have to count the business as starting the first day you had an expense?
Since I had my flat for nearly a year before I got any paying guests and for several months before I was even legal to advertise, I'm not sure when I should count my business as starting. Presumably, the date I choose will be the date from which my 'electing' for it to be counted as an FHL will run a year from then, but in the following period, reaching the threshold might be easier if I start counting less than a year in from when my first guest arrived, if you see what I mean.
I have had the same query as Ludwig. Did you ever get a definitive answer L? If so, can you report here? I guess it might be worth giving HMRC a ring, if not.
I'm also wondering about what to state as the date of the start of the business, for 'Election' purposes.
You can have pre-business expenses, can't you, so I don't think you have to count the business as starting the first day you had an expense?
Since I had my flat for nearly a year before I got any paying guests and for several months before I was even legal to advertise, I'm not sure when I should count my business as starting. Presumably, the date I choose will be the date from which my 'electing' for it to be counted as an FHL will run a year from then, but in the following period, reaching the threshold might be easier if I start counting less than a year in from when my first guest arrived, if you see what I mean.
Dear OrangeBlossom,
I spoke to HMRC and they were unable to answer the specific question on capital expenditure but I'll let you know once I submit receipts to my accountant.
In my case, the first trading period (potentially also the start of the first grace period) started this March on the day on which the property first became available for letting. This is easy to prove, since it's let via a company.
I am assuming that the expenses incurred before this date can be treated as "pre-trading" expenses and included in the accounting for the first trading period.
Does that help?
Ludwig
I spoke to HMRC and they were unable to answer the specific question on capital expenditure but I'll let you know once I submit receipts to my accountant.
In my case, the first trading period (potentially also the start of the first grace period) started this March on the day on which the property first became available for letting. This is easy to prove, since it's let via a company.
I am assuming that the expenses incurred before this date can be treated as "pre-trading" expenses and included in the accounting for the first trading period.
Does that help?
Ludwig
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OrangeBlossom
- Posts: 44
- Joined: Tue Dec 30, 2014 12:03 am
- Location: Tavira, Algarve, Portugal
Interesting
Thanks Ludwig,
interesting that HMRC weren't prepared to or couldn't answer your question about capital expenditure. That's the critical one for me but not sure if they don't know how your accountant will know how HMRC will be likely to view it a year or so down the line if you don't meet the threshold.
I'm working on the assumption that all the expenditure will be able to be carried forward as a loss and that I won't end up massively out of pocket but I will try my damndest (sp?) to make sure that I meet the threshold within a year of any extensions. That'll probably mean having to spend loads more on advertising in at least one year but surely once one has met the threshold number of days rented once, the loss will quite legitimately be carried forward indefinitely.
Anyway, do let us know if you find out anything more definite at any point.
interesting that HMRC weren't prepared to or couldn't answer your question about capital expenditure. That's the critical one for me but not sure if they don't know how your accountant will know how HMRC will be likely to view it a year or so down the line if you don't meet the threshold.
I'm working on the assumption that all the expenditure will be able to be carried forward as a loss and that I won't end up massively out of pocket but I will try my damndest (sp?) to make sure that I meet the threshold within a year of any extensions. That'll probably mean having to spend loads more on advertising in at least one year but surely once one has met the threshold number of days rented once, the loss will quite legitimately be carried forward indefinitely.
Anyway, do let us know if you find out anything more definite at any point.