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bigduckontax, Accountant
Category: Tax
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Sam, I have not used this service before so am unsure how it works. I live overseas an

Customer Question

Hi Sam,
I have not used this service before so am unsure how it works. I live overseas and have done for over 15 years, my husband and I have a house in the UK that we rent out and we complete annual tax returns relating to this property. In May 2015 I (not jointly with my husband) sold an overseas property and bought a new fully furnished holiday lodge which is currently being rented out via the Lodge park. I will receive income for the rental at the end of the 12 months (May 2016). There has been many items bought on top of the initial price including soft furnishings (plates knifes, forks, bedding & a hot tub) which all contained VAT.
1) Can I / should I registered for VAT and be able to claim the VAT on the purchases from May 2015 to now and onwards as they happen?
2) Can I / should I register as a business for the Lodge or should I continue to complete my annual return including the lodge?
3) How do capital allowances work on my tax return if I don't become a business
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. With respect, you already are a business, you rent out a dwelling and very properly pay the tax due on the rentals. I would continue as you already do. Capital allowances only apply to major items, mainly the purchase of plant and machinery and will almost certainly not affect you. Virtually all your expenditure in your business can be offset against income Tax. There is 'a 10% of rental rule' as a quick and easy way of claiming this, but it is going out of use in favour of actual expenditure from April 2016. I do hope that I have shed some light on your position. There is no requirement to register for UK VAT unless the turnover exceeds or approaches 82K in any one year. Below the turnover threshold you do not need to account for VAT. You can register voluntarily. This enables you to reclaim input tax, but at the penalty of having to charge VAT on lettings which increases the cost to your customers by 20%, involves you in accounting for the tax and making quarterly returns.
Customer: replied 2 years ago.

Hi Keith

Thank you for your reply.

I have been informed that for the initial purchase of a fully furnished holiday lodge which was in excess of GBP 200k, capital allowances do apply and can be offset on the tax return.

I will continue to try and get hold of the HMRC to get further clarity on this.

Best Regards


Expert:  bigduckontax replied 2 years ago.
PIM4105, Gov UK's guidance on holiday lettings, a trade gives the following advice on capital allowances:
'Entitlement to plant and machinery capital allowances on furniture, furnishings, etc in the let property, as well as on plant and machinery used outside the property (such as vans and tools); but there are no capital allowances for the cost of the property itself or the land on which it stands; there is more about capital allowances generally at PIM3000 onwards.'
Have a look here for a possibility that you can claim 25% of the capital cost of he premises: