Cost of Startup & Carrying Losses Forward

10/01/2019 17:52:52
Hello, I've got some questions about carrying losses forward.

I bought a property in 2016 but have not received any income from it until 2018.

1. Can the costs incurred in repairing the property prior to letting it (from 2016 - 201 be included in losses to be carried forward?

2. Can you give examples of what differentiates repairs to make the property habitable/letable, which I understand are allowable expenses and new additions? E.g. I have had rewiring carried out on the advice of the surveyor, damp treated, roof repairs, front door replaced to comply with insurance requirements, carpets replaced due to destruction during rewiring etc. Which of these can be counted as allowable expenses?

3. For how long can the losses be carried forward? Eg if my costs were £10,000 between 2016 and 2018 and I receive £1000 in 2018 - 19 can £9000 be carried forward to 2019 - 2020 and further into future years if necessary?

4. Can you give an example of how to show losses incurred before letting the property and losses carried forward in the Self Assessment form?

Many thanks for any help and advice you can give.

Re:Cost of Startup & Carrying Losses Forward

10/01/2019 18:19:01

Money you spend on the property after you’ve acquired it may be capital rather than an allowable expense against rental income. If the property was not in a fit state to be rented out without undertaking the work, or the cost of the property was substantially reduced to reflect its poor condition, then the costs of putting it right are likely to be capital expenditure.

For further information, please see ‘Repairs etc after a property is acquired’ in PIM2030 here:

Property Income Manual PIM2030

If the expenses are allowable then these would be treated as pre-letting expenses and claimed at the point the property is first let, guidance is available here:

Property Income Manual PIM2505

Losses can be carried forward to set against any future profits of the rental business until such time as these have been fully utilised.

I hope this helps.