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Sam, Accountant
Category: Tax
Satisfied Customers: 14195
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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There. I used to live in a property. We then moved to a

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Hi there. I used to live in a property. We then moved to a new house and let my parents stay in the old house for about six months while they looked for a new house nearby. After that we decorated the house with a view to either selling or letting. The house is owned jointly by my wife and I. We lived in the house for about seven years prior to moving out.
In the end after looking at how much we could get for a standard tenancy agreement we decided to let the rooms as digs for theatre folk. (My wife and I both work in theatre and it is standard practice for performers and designers etc to let a room from someone when they are on tour or working away from home). The nearest equivalent we can find on the inland revenue website was holiday letting and initially we thought that would suit our needs.
Most people are typically renting one of the three rooms for a week or two at a time. Designers and technicians tend to stay for 2 to 8 weeks at a time. When we approached the council about whether we should pay rates or council tax they advised that they would treat it as a holiday let and that we should pay a reduced rate of council tax in our name. The house is fully furnished and is advertised and available all year.
Where things have got tricky is that a couple of customers have become more regular bookers. We let directly to the Citizens Theatre quite a lot, for different people throughout the year. We also have one customer who has stayed whenever he has been working in Glasgow which has been for more than the 31 days on enough occasions to take us over the 155 days. When he has been staying there have been various other people in and out of the other rooms on short term stays for a week or two. The lets to the Citizens Theatre are quite often for just over 31 days but with the person only using it for three or four days of each week. There are people in and out all the time, sometimes only for a couple of nights at a time, sometimes in one room for a couple of months.
It feels like our situation falls between different types of letting. We're just looking to find out how we should be treating it for tax purposes and whether this is something we should be putting on our tax return and what expenses would be legitimate?
Hi Thanks for your questionI am afraid this will not be treated as holiday lets as this was for not for holiday purposes and this is irrespective of the fact that you had regular bookers or the one booker that exceeded the 31 days. It also cannot be treated under the rent a room scheme as neither you or your wife continued to reside here, so it will be treated just as regular Schedule A rental income as it if it neither one thing or the other than its just rental income ! So for this you would declare all the rents and from the rents be eligible to deduct the % of costs according to the rooms let at any one time. So say there are 5 bedrooms then when all 5 bedrooms were let you could claim the full costs of any interest payable on a loan/mortgage and the full costs of gas, electricity, council tax, tv licence etc etcBut if only 3 of the 5 were let then apportion costs accordingly. My answer would only differ if you provided any meals or other services to the boarders - let me know if this might be the case. But based on what you advise it will mean that you have to trawl through the bookings and the apportionment - so each months claims to costs represents the true position Let me know if you wish any further assistance with this response Thanks Sam
Customer: replied 2 years ago.
Thanks for the reply.That's a bit of a worry re only being able to claim a percentage of expenses if only one or two rooms are let. If only one room is let they have the use of that room, the kitchen, the lounge, the bathroom, garden, driveway etc, all of which incur costs. i.e. quite a large percentage of the overall area of the property. Could it be pro-rata'd on the percentage of the property in use rather than the number of bedrooms?Also, would my wife and I declare the half the costs as well as half the income? The property is in joint names. Could I declare more costs against my tax return as she doesn't pay much tax?Also, I'm assuming we just put this in other income on our tax return in boxes 16 and 17. Would that be right?Thanks,Graham.
Hi Thanks for your response I am afraid that is the way it is - as its about determining the actual out of pocket expenses for the "guests" you had staying rather than claiming a full amount all of the time when you may only have had one room available.If you had let to one (or a family) full time then of course all the bills incurred would be wholly and exclusively due to the rents received (tenants in situ) but this is not the case. By all means you can use the sq footage of the house if this would prove more viable - ThanksSam If you wished to fine tune matters d
Let me know if I can assist further Thanks Sam
Customer: replied 2 years ago.
Hi there. It looks like you didn't quite finish a sentence - "if you wished to fine tune matters d..." was there something that should have been on the end of that? Thanks.
Hi I do apologise I changed the sentence and then failed to delete the original phrasing - I was going to write that you could fine tune matters by establishing the weekly position - which would prove to be more accurate in costs arising - but as most bills are monthly and this could prove to be a huge task based on the many comings and goings of guests - I decided not to write it - but of course - if you would like to do this - then you may find it would be a useful excercise, along with the sq footage suggestion. let me know if I could assist further Thanks Sam
Customer: replied 2 years ago.
OK. So if we work out how much as a percentage of the overall square footage is in use on each day then apply that to the monthly bills would that work? How would that work with things like repairs and decoration etc? For example, we had someone that flooded the bathroom leading to repairs needed. Can I claim the full cost of that even though only one room was let at the time?I still think it's weird that it has to be per room let. We don't use the house for personal use at all. It is only kept to be let for profit and all the rooms are available for rent all the time.
Hi Thanks for your response This is getting far more involved than your original question suggested - but as your first time on Just Answer, I will advsie on these further points - (and you did ask in your initial question which expenses would be allowable;e First as this is jointly owned property you have to declare this 50:50 As for completing your tax return you would have to list this as anew question (or I could offer you additional Q & A time - either way will incur an additional cost I am afraid Repairs are allowable - and I would allow 100% as would have been caused by guests whether by 1 2 or 4 of them! But only repairs that arise from guests living in the property - so decoration sis not allowable as this would be to get the property ready for letting - so not a direct cost against rents.So yes to 100% of the bathroom being flooded but would insurance not have covered this? I am sorry you do not agree with the costs position - but you chose to make this run as an HMO - but with people coming and going as if it were a short term let such as a B & B - why should HMRC pay for you to keep this property running if you sometimes are less to full capacity - which in essence you seem to think would be fair! This way you are claiming reasonable costs Thanks Sam
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Customer: replied 2 years ago.
OK. Thanks for the advise.