Can anyone advise me if a valuation fee and a mortgage product fee are allowable expenses?
Also if an amount is held by a letting agent, how is this treated.
If rental profits are split 50/50 husband and wife, if the wife is a non tax payer, and the percentage of profit is below personal allowance do they need to advise HMRC on income?
I'm looking into property rentals too and I have been researching/reading up material on this. It is not as easy as it may seem, it is actually a minefield! Here is my understanding.
** Valuation Fee **
It depends on the purpose of the valuation. If the valuation was needed by the client to decide whether or not to purchase the property initially then I believe that the fee should be capitalised (added to the purchase price of the property along with all the other costs directly related to the acquisition). Unless the client did not proceed to purchase the property in which case the valuation fee becomes an "abortive" expense and is unlikely to be tax deductible. If the valuation was required by the bank to get initial finance or remortgage (e.g. bank's requirement to get the loan approved) then I believe that the valuation fee will be treated the same way as the finance cost related to the loan (e.g. allowable, but needs apportioning over the life of the loan).
** Letting Agent **
I'm not sure what you mean by "an amount held". Is this letting agent's fee for management (deducted from rent)? If so, it is a deductible expense every month.
** Tax Returns **
I don't think you can split the income 50/50 unless the property is owned jointly. I'm not sure about the tax returns but it may be that the wife still has to submit a self-assessment tax return (being a part-owner) to report her income even if there is no tax to pay on it. Also the "connected parties" angle comes into play a lot in property taxation (husband and wife are connected parties, but I'm not sure if it relevant in this case).
I'm still studying and researching this area so don't take my notes above as recommendations.
I do find taxation of property a fascinating field.
All the best. Fabs
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Can anyone advise me if a valuation fee and a mortgage product fee are allowable expenses?
They must be capitalised. You incur them to acquire the asset itself. You don't incur them to enable you rent the property.
Also if an amount is held by a letting agent, how is this treated.
If the amount will be repaid at some point (not sure what this could be) then treat as an expense - categorise as agent holding fees. When repaid, put into accounts as other income.
If on the other hand, the amount held is management fee, write off as and when incurred to expenses.
If rental profits are split 50/50 husband and wife, if the wife is a non tax payer, and the percentage of profit is below personal allowance do they need to advise HMRC on income?
Tax or not, HMRC must be advised if income exists. Note that late submission of a return, tax or not, invites penalties.
All the best Phoenix
-- Edited by phoenix debola on Saturday 23rd of June 2012 05:02:33 PM
-- Edited by phoenix debola on Saturday 23rd of June 2012 05:05:38 PM
