Expenses for an established rental business

28/05/2019 07:20:06
We have a property rental business with one property that has been running for a number of years. We recently bought another property, renting it just as soon as renovations were carried out. The property in question was completely sound but was very run down and required fairly extensive work including plumbing and central heating, electrical and complete decoration. The total amount spent on these renovations was just under £20k. Will this count as allowable expenses against income from the established business or is it regarded as a capital expense? Also will any net loss be carried forward to the following year?

Re:Expenses for an established rental business

28/05/2019 12:47:35

Thanks for your question.

Generally all the various types of income from UK land and property are treated as part of the same single rental business regardless of the number of properties you own.

Normally, all rental business receipts and expenditure will be lumped together so the expenses from one property could be set off against the income from another.

Please see Property Income Manual 1020 for more information.

Please however note that sometimes costs of work on a property before it is rented out will not be allowable. For example, if you buy a property in a derelict or run-down state and either paid a substantially reduced price for it or it was not in a fit state to rent, it is likely that in these circumstances, works undertaken to put the property into a fit state for renting out will be capital works as they improve the property. This expenditure would be taken into account for Capital Gains Tax purposes when disposing of the property.