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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Re possible inclusion of a Holiday House in a Tax Return.

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Hi, re possible inclusion of a Holiday House in a Tax Return. Client has a holiday house - bought the house for £42,500 in Feb 2014, this was £30000 under valuation. They have done the house up and furnished it, they let only to friends , relatives and work colleagues at a nominal cost of £20 a night. It is not advertised but they have a drop box link to show friends photos.
Client phoned the Self Assessment helpline and was told that although we do not make a profit it had to be reported. I should include it in my self assessment, and my wife who is PAYE should provide a letter once a year
2016 is the first year they let those beyond immediate family go up and have a total income of £1700.
Is HMRC correct? Is this reportable, and if so how is it best included.
• they will be unable to claim as a furnished holiday let, ( they are not charging a commercial rate) and house is not let to the public.
• They don’t qualify for the rent a room scheme as it is not our main home
Thank you, CAS
Submitted: 7 months ago.
Category: Tax
Expert:  TonyTax replied 7 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 7 months ago.

If the pre-expense deduction rental income is £10,000 or more or the net rental profit is £2,500 or more in a tax year, it needs to be disclosed in a self-assessment tax return as normal rental income. If you already complete tax returns in any event, then clearly you disclose it in any event. If the figures are lower than £10,000 and £2,500 and you have a PAYE source of income you can choose to have the tax on the rental profit collected through your tax coding but only if that source of income is sufficient to absorb the extra tax liability. No more than 50% of your pay can be deducted in tax and the tax deduction cannot be more than doubled by the addition of the rental income tax liability.

I hope this helps but let me know if you have any further questions.

Customer: replied 7 months ago.

Hi Tony, I was wondering where I can source the info : "If the pre-expense deduction rental income is £10,000 or more or the net rental profit is £2,500 or more in a tax year, it needs to be disclosed in a self-assessment tax return as normal rental income." It is not very obvious on the Property Pages or on .Gov.UK's wonderful website...

Am I interpreting that 'holiday lets' to friends not done on a commercial basis and merely as a contribution to costs £20/night would not be declarable in any event. Esp. as the total turnover was only £1700. Because once costs are deducted most likely there would be a false loss situation. Thanks, CAS

Expert:  TonyTax replied 7 months ago.

Look at the webpage here.

If a property is let at less than a commercial rent, then you can only claim expenses up to the level of the rent. Look here for more information on that. If it were me, I'd disclose the income in any event and show a nil profit after expenses if I incurred expenses in excess of the rent.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15882
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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