Hello, I am Keith, one of the ex[erts on just Answer, and pleased to be able to help you with your question.
As this is a Joint Tenancy then the net rentals received must be declared 50/50 for Income tax (IT) purposes. Also remember that of the mortgage repayments only the interest element of these can be used to offset rentals for IT purposes. It is possible to adjust this percentage using a Form 17 procedure, but this means that the ownership percentages will have to be adjusted, the pair of your becoming Tenants in Common and will result in the partner loosing some of the income being liable to Capital Gains Tax (CGT) on any gain made as at the transfer as this adjustment counts as a disposal.
As for pre-letting expenses under the pre-trading rules [source: Tax Insider]:
'To the extent that these are revenue in nature relief is available under the pre-trading rules. These enable expenses incurred before the start of the property letting business to be relieved when calculating profits, provided that:
• the expenses were not incurred more than seven years before the start of the business;
• a deduction would be allowed for the expenses (under the normal rules for deductibility of expenses) if they were incurred after the start date; and
• they are not otherwise deductible.
Relief is given by treating the pre-trading expenses as if they were incurred on the first day of the property rental business.'
I do hope that I have been able to shed some light on your conundrum. To make the profit adjustment to throw more load on your husband you could consider setting up a management company to let the property and pay net income out by making a salary payment reflecting the management responsibilities before distributing the balance.
Well technically they should have been included in the prior year tax account as a loss which would be carried forward to the current year, but the result is the same, effectively in tax terms it is a lemon!
Yes you can, but as I said technically the expenses should have been included in last year's return as a loss and that loss carried forward. Instead just include them in the current year as the end result does not, as my old boss was wont to say, alter the price of cheese. In accounting terms it is a lemon, whichever way you do it the result is the same.
Thank you for your support.
And your kind bonus.