I've had a few potential clients approach me to do their rental property accounts and tax returns, but I've had to turn them down as I don't feel comfortable doing them.
Can anyone suggest how I can brush up on the do's and don'ts of rental property accounts? I've tried reading up on it using the HMRC website, but some of it is very complex. I'm looking for more of a text book approach.
I do work closely with an accountant friend, so if I do get stuck at a later date she would advise me. I just want to start to get me head around the fundamentals first...
I'm not sure about any textbooks, but the direct gov website has some basic info as a starting point (eg type "rental property taxation" into google). HMRC's SA105 property notes are also quite helpful for self assessment clients.
the key things in my opinion would be to:
- check all the rent has been accounted for, and is in the correct period (unless qualify for cash accounting) - PIM1101 might be useful - check expenses are allowable and consider if expense or capital items - if not limited company, read up on rules for wear and tear allowance - can normally claim mortgage interest as an expense
I would say just go for it, and when you've done 1 you'll have figured it out, especially as you have that accountant friend to help you as well.
I think that there are slight differences depending on whether the property is furnished or not.
I have an unfurnished property that I rent out and have had an accountant complete my returns for the last several years. I hope to be completing the accounts myself this year.
If you have anything specific I'll check previous returns to see if I have an answer.
You can claim back 10% wear and tear if its furnished, if unfurnished I believe you can't.
Interest on Mortgage is claimable, and any expenses that are incurred like Gas safety certificate etc. The majority of properties are unfurnished, but Student lets are normally furnished like beds, wardrobes, desk and chair in each bedroom, normally fridge freezer and washing machine. So all those things can be claimed as and when you are buying them or replacing them. I would like to think that a washing machine will last a few years.
Hopefully they have a income going in a separate bank account so you can see easily what income they are getting from it.
You can claim back 10% wear and tear if its furnished, if unfurnished I believe you can't.
Or you can claim the replacement value of the furnished items.
As Amanda says you cant claim the 10% wear and tear on unfurished properties as the point of it is to compensate for the loss of capital allowances on the furnishings. You can however claim repairs.
And to add to the above there are different rules for furnished holiday lets to other types of furnished rental properties.
For instance, with FHLs capital allowances are allowed for furnishings where there are not for other types of rental.
What constitutes a holiday let though is quite strict.
See helpsheet 253 for further details (http://www.hmrc.gov.uk/helpsheets/hs253.pdf)
regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
