How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask TonyTax Your Own Question
TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
13905389
Type Your Tax Question Here...
TonyTax is online now

I am on the point of buying a caravan to rent out as a furnished

Resolved Question:

I am on the point of buying a caravan to rent out as a furnished holiday let providing i beat the 15 week rule. I will have to pay about £3k by november in site fees and insurance. The site does not open until March 9 2016 and I will not be able to rent it out unti lthen. I have just been told by a gruff HMRc man that as I am not claiming rent for a tenant until march I will not be able to claim the £3k as a business expense. I was counting on deducting this £3k from rental income as an actual business cost and if I cannot it means I will be 3k down to start with. This seems unfair as the site fee for March 2016 onward is payable now so i have no choice and it is a legitimate busines scost not just a deductible expense. Another official said Ci could carry a loss over but this man said i could not because the business does not start till march
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi. A holiday let is treated as a genuine business by HMRC as opposed to other forms or letting which are not. In any event, you should be able to claim relief for pre-trading/letting expenditure such that the expenses you have to pay in November will be treated as having been incurred on the first day of trading. Take a look here, here and here for more information. I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 2 years ago.
Hi. A holiday let is treated as a genuine business by HMRC as opposed to other forms or letting which are not. In any event, you should be able to claim relief for pre-trading/letting expenditure such that the expenses you have to pay in November will be treated as having been incurred on the first day of trading. Take a look here, here and here for more information. I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Will I have to state on SA form that this is a 'pre-trade expense' or just enter figure.? Also the 3k will result in a loss in 15/16 as rent will not start till march earliest ( and may start in 16/17) and I was told by the first sensible hmrc person that i should enter it and carry it over as a loss.. The 2nd HMrc person I spoke to (so called 'technical') was adamant that i could not claim anything before the caravan was available for rent in march even when I told him 3 times that the 2.7k site fee actually covered the period starting March 2016 plus insurance also covering the period.. Why do you think he gave such wrong advice?
Expert:  TonyTax replied 2 years ago.
You would not necessarily tell HMRC that it is pre-trading expenditure as it should be included with the other expenses incurred after trading starts in the relevant boxes of the tax return property pages. HMRC can ask to see proof of your expenses if they wish to. You can carry forward a loss to the next year for offset against the next available profit.Newer HMRC staff are pigeoholed so they have a limited knowledge though there are still some all rounders.
Customer: replied 2 years ago.
Thank you for that! I shall take advice from HMRc with discretion. Renting out the caravan won't actually qualify it as a 'holiday let' until I rent it for 15 weeks in 2016/7 so technically pre 2016/7 i.e.2015/6 tax year it is just furnished accomodation. Are you sure that it qualifies as a 'business' in 2015/6.? I will have to spend some money on caravan contents e.g bedding and am unsure if I can claim it as a 100% capital allowance because it wont be a holiday let then and claiming 10% wear and tear allowance wont be practical. So can I claim it at all or put it in 2016/7 tax year (even though date o invoice for it will be in 2015/6)
Expert:  TonyTax replied 2 years ago.
I would put the business start date as 6 April 2016. The way the criteria work is initiallu based on a 12 month period which doesn't necessarily equate to the tax year but it would be simplet to have your start date as 6 April 2016. Look at the HMRc notes on FHL here:
https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015
Customer: replied 2 years ago.
just one last thing! If I do that can you confirm that I can still claim the site fee and insurance as 'pre-trade expences' even though I have to pay them now and that I enter them in my 2015/6 SA where they can be carried forward as a loss to 2016/7 alongside any rent receipts I might take in march 2016. If I start business 6 April 2016 does this prevent rental income prior to that date?
Expert:  TonyTax replied 2 years ago.
If you have the start date as 6 April 2017 which is what I would do, you won't include them in your 2016 tax return as the business won't have started. The SA105 pages are at:
https://www.gov.uk/government/publications/self-assessment-uk-property-sa105
I don't follow your last question.
Customer: replied 2 years ago.
I'm sorry but i am totally confused now. What I want to know is ; If I start business 6 April 2016 (you said 2017 2nd reply) where do I state my pre trade expences of about £3k. In 2015/6 SA return as a loss or can they be included in 2016/7 SA even though the date on them will be Nov 2015. I initially asked the Hmrc whether I could actually carry over these expenses i.e.not include them in 2015/6 sa return but put in 2016/7 SA and was told no, that I had to state them in my 2015/6 SA return as they had been incurred in that year.
Expert:  TonyTax replied 2 years ago.
I apologise. I meant 2016/17 or 6 April 2016 start date.
As I said in my first answer, you treat pre-trade expenses as if they were paid on the first day of actual trading so if there is a loss, you carry it forward. If the first day of trading is 6 April 2016, then they are 2016/17 expenses. You will complicate matters by claiming them in a tax year, where you have no income from the let.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you very much. We got to, (putting expenses in 2016/7 SA return), as I wanted to do in the first place but was told by HMRC I could not. Now I know I can by labeling them pre-trade expenses. Thank you very much for dealing with this and putting up with me! I shall rate you know.
Expert:  TonyTax replied 2 years ago.

Thanks and good luck. Refer HMRC to their own manual if you have problems.